Sources of Finance
- Created by: Ashleigh Hockenhull
- Created on: 04-05-15 11:42
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- 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
- let the firm take more money out the bank than it has in its account
- trade credit
- 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
- three types of loans a small business might take out
- venture capital
- money invested by individuals or businesses who specialise in giving finance to new or expanding small firms
- loans
- grants
- for new & small firms it can be hard to raise finance
- need finance for many reasons
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