External Finance

  • Created by: march_e
  • Created on: 21-05-17 16:26
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  • External Finance
    • Sources of finance
      • family and friends
        • provides money either directly into the business, quicker and cheaper to arrange and interest and repayment terms may be more flexible than a bank loan
      • peer to peer funding
        • involves raising a loan from a group of individuals or institutions and is a very flexible source of borrowing
        • unsecured, so the borrowers do not have to commit personal or business assets as security, best suited for experienced companies
      • business angels
        • wealthy, entrepreneurial individuals who provide capital in return for a proportion of the company equity
      • crowd funding
        • entrepreneur can attract a ‘crowd’ of further investors
    • Methods of finance
      • loans
        • amount of money borrowed for a set period within an agreed repayment schedule
      • share capital
        • Money invested in a company by the shareholders.
      • venture capital
        • capital that is invested in a project where there is a substantial element of risk relating to the future creation of profits and cash flows
      • overdrafts
        • provided when businesses make payments from their business current account exceeding the available cash balance
      • leasing
        • hire purchase are financial facilities which allow a business to use an asset over a fixed period, in return for regular payments
      • trade credit
        • purchasing items on account and paying at a later date
      • grants
        • sum of money provided by the government to a business that does not have to be repaid


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