Sources of Finance

HideShow resource information
View mindmap
  • Sources of Finance
    • need finance for many reasons
      • need start up capital to buy assets needed to run the business
      • need to finance their poor initial cash flow
      • need enough cash to meet day-to-day costs of running the business
      • sometimes customers delay payment - finance need to cover this shortfall in liquidity
      • may need to fund expansion
    • main sources of finance
      • grants
        • often given to qualifying new or small firms
      • short term sources
        • trade credit
          • rather than expecting the customer to pay cash on delivery, most businesses will issue them with an invoice - usually gives them 1 or 2 months to pay
        • overdrafts
          • let the firm take more money out the bank than it has in its account
            • interest charges are high - but only while overdrawn
      • long term sources
        • loans
          • three types of loans a small business might take out
            • bank loans - quick & easy to take out, but need to b repaid w interest
            • loans from family & friends
            • mortgages
              • long-term loans used to finance buying property
        • venture capital
          • money invested by individuals or businesses who specialise in giving finance to new or expanding small firms
    • for new & small firms it can be hard to raise finance


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Finance resources »