A flying start - Question A

  • Created by: Chiangy14
  • Created on: 21-04-15 10:43
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  • Investigate the possible sources of finance available to an entrepreneur planning a business start-up that requires a large capital investment. (10 Marks)  
    • Internal sources of finance
      • Savings
        • Could use her inheretence of £675,000
          • In addiation she has also been earning £50,000 per year salary as a pilot
          • Less moeny is needed to be borrowed which helps her out during the quieter winter months
          • Avoids giving away too much equity allowing sheena to meet her objective to be as indepeddent as possible
      • Profits
      • Share issues
      • Interest from savings and investments
      • Friends and Family
        • An agreed amount of funds to borrow from a family member
          • Father cannot afford to lend her the entire start up capital
          • No interest rate
        • Means that there is another investor taking over key decisions
        • More flexible about paying back the loan
        • The only drawback is that she wants to be fully independent
    • External sources of finance
      • Grants
      • Shares
        • It is a private limited company so she can issues new shares
          • Selling shares privetly to frineds or family could gain them the other 52% of capital
            • Her father knows peopl that are willing to buy shares in the company
              • If she sells all 52% of her shares to an invester she loses total control and may be forced into decision that she doesnt like
      • Venture Capatlists
        • May be willing to invest in her business
          • Given her exeperience in piloting and her business plan and location
            • Her father might contact some of his wealthy business contacts
              • Risk that selling her shares means she loses control of her business
      • Government Incentives
      • Loans and mortages
        • Bank loan
          • An agreed amount borrowed from the bank and repaid with an agreed interest fee added
            • This means that she can still keep control of her business
              • Would create a drain on finances and lead to extra costs
                • Would be a problem because of the month they start they wont receive very much income to start with
            • With low interest rates in the UK there is a potential to borrow form the bank


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