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Direct Sources of Finance ­ ACCN3

Different Sources of Finance
Bank Overdraft

Features A bank overdraft is a flexible agreement with a bank which allows a
customer to borrow money on a current account up to a certain limit.
Interest is paid ­ normally at a variable rate in line…

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Direct Sources of Finance ­ ACCN3

Mortgage

Features A mortgage is an agreement, in which a property is used as security for
borrowing. If the borrower defaults in the loan, the lender can sell the
property to obtain the funds.
Banks can provide finance for purchase of commercial property,
normally…

Page 3

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Direct Sources of Finance ­ ACCN3

Disadvantages If outside investors buy into the company by acquiring ordinary shares,
they will have an element of control of the company which could prove
disruptive for the existing management.
With most shares, the finance is never `paid off' as it is a fixed…

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