Business Studies: Raising Finances

Internal Finance - Short Term.

• Cash in bank.
• Buying less stock to save money.
• Chase up debters (those who owe money).

Internal Finance - Medium / Long Term.

• Retained profit.
  • Using profit from previous years to expand the business.

• Sale of Assets.
  • Selling off buildings and machines that are no longer needed.

• The owner puts in more money.

External Finance - Short Term.

• Overdraft.
  • The firm arranges with the bank to take more money from it's account than it usually does.
  • There's usually a time limit and and the firm has to pay interest.

• Trade Credit.
  • A firm buys stock and supplies and is given 30 - 90 days to pay.

External Finance - Medium Term.

• Bank Loan
  • Money borrowed for a certain time period and purpose.
  • The bank will usually want security.
  • Interest has to be paid.
  • Loans are usually paid back bit by bit over time.

• Leasing (renting).
  • Renting instead of buying equipment.

• Venture Capitalists.
  • Very wealthy firms that invest in high risk but high reward firms.

External Finance - Medium Term 2.

• Business Angels.
  • Very wealthy individuals invest in high risk but high reward firms that they like.

• Hire Purchase.
  • Buying equipment in stages using monthly payments.
  • The equipment is yours when you make the final payment.

• Grants.
  • Uncommen but useful - money is given to help people start businesses.

External Finance - Long Term.

• Issuing Shares.
  • Can only be done by Ltds and plcs.
  • Can raise a lot of money.

• Mortgage.
  • Long term loan to buy property.
  • Paid back over time with interest.

• Debenture.
  • Like a bank loan but not from the bank.
  • You pay interest each year but don't pay the whole thing back  until the end of 5 or 10 years.