Sources of Finance
- Created by: Rebecca.downing97
- Created on: 11-04-15 12:34
View mindmap
- Sources of Finance
- EXTERNAL
- BANKS
- BANK OVERDRAFT - flexible short-term borrowing of a certain limit, interest, reviewed annually and security required.
- FLEXIBLE - borrow and repay whenever
- ECONOMICAL - interest only paid when overdrawn
- INTEREST HIGHER THAN FOR BANK LOAN
- IMMEDIATE REPAYMENT CAN BE ASKED FOR BY BANK
- SECURITY - could include owner's house
- BANK LOAN - for specific purpose, fixed or variable interest rates, set for a time period (medium/long term), repaid in regular installments, security required.
- EASY TO BUDGET FOR - know timing and repayment amount
- MAY BE FLEXIBILITY in repayment schedule
- FAVORABLE INTEREST RATES can be negotiated
- LONG TERM FINANCIAL COMMITMENT - can they keep up
- SECURITY - possible owner's house
- MORTGAGE - loan for purchasing property, the property is the security, can be finance for commercial property, interest (fixed or variable), fixed time period.
- EASY TO BUDGET FOR - timing and amount known
- IF FIXED RATE TAKEN WHEN IT IS LOW - cost of borrowing will be low
- LONG TERM FINANCIAL COMMIMENT
- SECURITY - property, possibly owners house
- BANK OVERDRAFT - flexible short-term borrowing of a certain limit, interest, reviewed annually and security required.
- BUSINESS ANGELS - control but input + expertise
- PRIVATE EQUITY CAPITAL - private financing for Ltd, shares have a percentage and input
- LIMITED COMPANY - SHARES
- ORDINARY SHARES - issued to shareholders in return for a fixed amount per share, can buy PLC shares on stockmarket.Dividend paid from profit.
- RAISES MORE FINANCE - than sole or partnership
- ATTRACTS NEW SKILLS AND EXPERTISE
- DIVIDENDS VARY -according to profit. If low profit, no dividend paid.
- PERMANENT CAPITAL - doesn't HAVE to be repaid
- CONTROL - vote at AGM
- CAN NEVER PAY IT OFF - will always pay dividends
- IF THEY 'GO BUST', ORDINARY LAST TO BE REPAID (bad from shareholder's pov)
- PREFERENCE SHARES - paid over ordinary shares. Fixed percentage dividend.
- NO VOTING RIGHTS - no input into company
- FIXED RATE - company can budget for this. They dont have to pay more than fixed rate if profits are high
- ORDINARY SHAREHOLDERS MAY LOSE OUT - if profits are low the preference must be paid first
- SOME CAN BE CARRIED FORWARD - still have to pay next year
- ORDINARY SHARES - issued to shareholders in return for a fixed amount per share, can buy PLC shares on stockmarket.Dividend paid from profit.
- DEBENTURE LOANS - fixed annual interest, fixed repayment date, no ownership rights given, company assets may be used as security
- HOLDERS CANNOT VOTE - no control in company
- FIXED INTEREST - can budget for
- STILL HAVE TO PAY INTEREST - regardless of profit
- REPAID BEFORE SHARES
- LIMITED COMPANY - SHARES
- BANKS
- INTERNAL
- Funds from Owner
- Funds from Profits
- EXTERNAL
- PARIS - purpose, amount, repayment, interest and security
Comments
No comments have yet been made