as business internal sources of finance

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trade credit

Trade credit: the period of time allowed by a business after supplying another business with goods or services before payment is due.


 No interest to pay

 Short term solution

 If payment is delayed for too long supplier may cut of credit

Best for:

Short term cash flow problems

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Overdraft: a facility from the bank that allows a business to spend more than it has its account up to an agreed limit  


Flexible- only pay interest on amount borrowed for as long as overdraft is needed

 Higher interest rates then a loan

 Not suitable for long term problems or large amounts

Best for:

Short term cash flow problems 

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Leasing: a long term rental agreement that allows business to use assets without having to pay for them


  • Assets obtained without large expenditure
  • Often may include maintenance and new models regally updated
  • More expensive then buying outright in the long term
  • Asset never yours
  • Interest paid- regular monthly payments

Best for:

  • Items such as vehicles
  • Medium term finance 
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hire purchase

Similar to leasing except at the end of the agreement the asset becomes property of the business


Asset obtained without large expenditure

More expensive then buying outright- long term

Interest paid regular monthly payments  

 Best for:

Items such as machinery/ vehicles medium term finance 

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The use of some one else’s money for a period of time


Fixed sum available- easy to plan for fixed repayments

Interest paid

Regular payments must be made regardless of cash flow  

best for

Medium term finance/expansion 

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venture capital

Funding provided by specialist firms or individuals in return for a proportion of the company shares


Immediate cash injection

Give up shares of your business- loss of control for owner

May charge hire interest rates?  

Best for:

Often obtainable by business deemed too risky for other business 

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share capital

Finance raised by selling shares in the company


Immediate cash injection

Does not need repayment

Loss of control/share profits

Best for:

Long-term or large expansions

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Debenture: a long term loan often secured on the companies property- the business equivalent of a mortgage


  • Immediate sum
  • Cash repayments spared over a long time
  • Interest rates can be lower
  • Secured against property
  • Regular payments must be made regardless of cash flow

Best for:

Very long term- large expansions 

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