Sources of finance
- Created by: Revision2015help
- Created on: 05-05-15 16:10
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- Sources of finance
- Family loan
- Agreed amount of money borrowed from a family member
- Roshini can afford to lend entire start-up
- Roshini as wealthy entrepreneur has funds to offer sheena at 0 interest .
- Benefits. {No sell shares. {No loss of control {Initial help no investors {family accept delayed payment {no forcing administration
- Cons! {sheena wants independent , relying on dad isn't true to her beliefs or wishes
- Venture capitalist
- Who takes risk by investing in small businesses
- Be willing to invest in Sheenas firm given pilot exper and surrey location and business plan
- Roshini may know wealthy contacts to take risk
- Benefits. {avoids need for high interest costs. {venture cap may be happy to not receive dividends in first years
- Cons! { risk by selling shares. {loss of control and independence {be pushed into rapid expansion
- Bank loan
- Benefits. { sheens keeps control. {makes decisions herself - operating from red hill / choosing what flights to offer { loan can be secured against helicopter! less risk to bank , s+r have invested over £1m finance / commitment
- Cons! { high amount required/ sheenas lack of track record interest still be high. { interest UK rates set to ride in 2016. {large interest payments drain on finance. Leads to extra costs/ just becoming established. { low cash inflow- large cash outflow
- Low UK interest rates at present , potential to borrow money
- Agreed amount borrowed from bank, repaid with agreed added interest
- Shared capital (equity)
- Sheena and roshan only have 48% of finance
- Could sell shares to raise remaining 52%
- SAS ltd Private company potential to issue shares privately
- Roshan has business contacts who could buy shares
- Finance raised through selling shares
- Benefit. {no interest as launch is end of main season for flights as interest is drain on finance
- Cons! {if investor bought 52% of company means loss of control in decisions and goes against independence
- Family loan
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