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Contents

Page 1: Retained Profit

Page 2: Sale and Leaseback of Assets

Page 3: Sale of Assets

Page 4: Share Capital (Long Term)

Page 5: Debentures (Long Term)

Page 6: Bank Loan (Long Term)

Page 7: Venture Capital (Long Term)

Page 8: Grants (Long Term)

Page 9: Bank Overdraft (Short…

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Retained Profit

The part of a firm's profit that is reinvested in the business rather than distributed to shareholders.

Advantages:

-It is a cheap source of finance (however they are not free) - effectively the "cost of capital" of retained profits is the opportunity cost for
shareholders of leaving profits…

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- You get the cash immediately, meaning that it is good if a firm is short of cash, this is good because it gives the firm cash, which is the most liquid
asset, so that they can pay off debts.
- Once the asset is sold, if it breaks the…

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Advantages:
- Limited Liability encourages shareholders to invest in the business, as it restricts the amount of money they can lose.
-It is not necessary to pay shareholders a dividend if the business cannot afford these payments. This contrasts sharply with loans- interest must be paid on
these, regardless of…

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Bank Loan

A sum of money provided to a firm by a bank for a specific agreed purpose.

Banks take security, usually in the form of property so that they can eliminate the risk of a loan not being repaid. If the loan is not repaid, they can sell the…

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The size of the loan and the period of repayment can be organised to match the exact needs of the firm.

Disadvantages:

-The size of the loan may be limited by the amount of collateral that can be provided rather than by the amount of money needed by the business.…

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Grants

There are many different grants available to businesses. These are sponsored by the Government, the EU and other agencies such as The Prince's Trust.
Growth Resourcing Associates offer an Internet advisory service for obtaining grants. They estimate that there are over 1,000 different grants available.
Research shows however, that…

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When a bank allows an individual or organisation to overspend its current account in the bank up to an agreed (overdraft) limit and for a stated period of
time.

Advantages:

-They are extremely flexible and can be used on a short-term basis (even just for a single day) if the…

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-Eases the cash flow as you can pay after 28-30 days, this means that if you cannot pay immediately, you have time to raise the cash needed.

Disadvantages

-If you do not pay them back on time you can build up a bad credit history.

-Only companies with good credit…

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