Sources of finance.
-A Bank loan- This is easy money with a interest charge. Banks will most probably ask for a business plan.
-Government Grant- Will not cover whole amount needed however these do not need payed back. ( sometimes difficult to obtain)
-Owners funds- avoid interest & its really quick.
-Overdraft- flexible form of borrowing. may be expensive.
-Mortgages- long term loans; to buy land/property.
-issuing shares- only available to companies, a new business may set up as a Private limited company.
-Family & Friends- quick & easy however could ruin relationships.
-Hire purchase- buying assets over a peorid of time
-Leasing- renting- no need to find a large sum of money.
Benefits & Disadvantages of sources of finance.
Owners funds- B= No interest. D= if business fails moneys lost.
Bank loan- B=Large sum of money. D=High interest rates.
Government Grants- B= Doesn't need to be repaid. D= Need to employ large amount of people
Overdraft- B=Flexible loan D=Interest gets higher as you go deeper into overdraft.
Mortgage- B= Bought the business and premises. D= long term ( up to 30 yrs)
Family & Friends- B= No BP And No time scale to repay. D= could ruin relationships if business fails.
The four P's and explanations.
PRICE- how much is the good/service going to be sold at.
PLACE- where will it be sold? locations.
Promotion- How will you promote the service/good.
Product- What is the thing your selling? a service like a bus journey or a good like a bottle of milk?
Key financal terms.
Price- Cost to produce it, Competitiors price.
Sales- the volume of products sold over a peorid of time.
REVENUE-SELLING PRICE X SALES
Costs-Are the spending needed to setup and run a business.
Set up costs- these must be paid before a business starts trading.
Running costs- day-to-day expenses.
Fixed costs- Fixed costs do not alter when a business changes output.
Variable costs- these are running costs that are directly related to the level of output.
TOTAL COSTS=FIXED COSTS+ VARIABLE COSTS.
Profits- is the amounth by which a business's revenue exceeds its total costs.
PROFIT (or loss)= REVENUE- TOTAL COSTS(fixed costs+variable costs)