Business Studies

HideShow resource information

Ordinary Share Capital

Is the money given to a company by shareholders in return for a share certificate. This gives them part ownership of the company and entitles them to a share of the profits.


  • Limited liability encourages shareholders to invest in the business, as it restricts the amount of moeny they can lose.
  • It is not neccessary to pay shareholders a dividend if the business cannot afford these payments.
  • Bringing new shareholders into a small business can often mean that further expertise is bought into the business.
  • Increasing ordinary share capital can make it easier to borrow more funds froma  bank, as the share capital can purchase assests that can be used in collateral.
  • It does not need to be re-paid so eases the pressuree on a limited company


  • In profitable years, ordinary shareholders will expect good dividends and this is likely to be more expensive than the interest charged on a loan.
  • The original aims of a business may be lost as new shareholders may not have the same values as the original owners.
1 of 6

Loan Capital

Loan cpaital is money recieved by an organisation in return for the organisation's agreement to pay interest during the peroid of the loan within an agreed time.

2 of 6

Bank Loan

A bank loan is a sum of money provided to a firm or an individual by a bank for a specific, agreed purpose.


  • The interest rate and thus the payments are fixed in advance, making it easy to budget the schedule for repayments.
  • Interest rates are usually lower because of the security provided.
  • The size of the loan and the peroid of repayment can be organised to match the exact needs of the firm.


  • The size of the loan may be limited by the amount of colateral thta can be provided rather than by the amount of money needed by the business.
  • It is often difficult or costly to repay a loan early.
  • Start-ups are often charged higher rates of interest because they are unable to provide the guarentees that the bank manager might like.
3 of 6

Bank Overdrafts

A bank overdraft is when a bank allows an organisation to overspend its current account at the bank up to an agreed (overdraft) limit and for a stated time period.


  • Theya re extremely flexible and useful for temporary cash-flow problems.
  • Interest is only paid on the amount of the overdraft being used.
  • They are particulary useful to seasonal businesses, which are likely to experience some cash-flow problems at certain times of the year.
  • Security is not usually required.


  • The interest rate charged is usually higher than for a loan.
  • Banks can demand immediate repayment.
4 of 6

Venture Capital

Venture capital s finance that is provided to small or medium sized businesses that seek growth, but which may be considered as risky by typical share buyers or other lenders.


  • Venture capital is available to firms that are unable to get finance from other sources because of the risk involved.
  • Venture capitalists sometimes nallow interest or dividends to be delayed.
  • Venture capitalisy may provide guidance and and advice.


  • Venture capitalists often wants a significant share of the business in return
  • Venture capitalists often wants high interest payments or dividends.
  • It is possible that venture capitalists will exert too much influence, so the original owner may lose their independance.
5 of 6

Personal Sources

This is money that is provided by the owner or owners of the business from their own savings or personal wealth.


  • A cheap source
  • It enables the owners to keep control over their business.


  • A person can quickly lose their savings.
  • The entreprenuer may not have sufficient savings to finance a new business.


  • Mortgage
  • Private borrowing from friends
  • Selling private assets
6 of 6


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »