Finance

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Overdraft

An overdraft allows someone to withdraw money even if the account has no funds.This means that they are borrowing from the bank.    ADVANTAGES:

  • Its there when you need it
  • They are easy and quick to arrange 

    DISADVANTAGES:

  • They can carry intrest and fees
  • You may face charges if you go over the agreed limit          
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Loans

 A loan is a sum of money lent for temporary use.       ADVANTAGES:

  • Not difficult to pay back as paid regulary 
  • You get a lump sum at one time

DISADVANTAGES:

  • You have to pay interest 
  • If you default then you pay extra charges 
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Mortgages

A mortgage is a lump sum of money borrowed from a bank to buy property. Its repaid over a period of time (over 25 years) with a set amount each month.              ADVANTAGES:

  • You get a lump sum of money 
  • long period to repay                             DISADVANTAGES:
  • Property could be repossed if you dont repay 
  • You have to pay interest


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Grants

Grants are a typical type of finacial aid that does not need to be repaid, however they are hard to get.        ADVANTAGES:

  • You dont need to pay them back                       DISADVANTAGES:
  • You cant spend them on anything, they are only given for specific things
  • They are really hard to get 
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Trade Credit/ Suppliers Credit

Trade credit is where a customer can purchase goods on an account ( without paying cash) paying the supplier at a later date                                                  ADVANTAGES:

  • You dont have to pay straight away
  • You can sell what you have bought straight away    DISADVANTAGES:
  • You have to pay it all back on a certain day.
  • If you dont sell the item then you still have to pay on the day, and you lose out on futre discounts
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Leasing

Leasing is a contract between the funder and a customer, giving the customer the use of the equipment in return for payment of rentals over an agreed period  ADVANTAGES:

  • The agreement starts immediately and the funder often pays for any damages                            DISADVANTAGES:
  • You have to pay them within the time limit
  • You dont get to keep the equipment
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Definitions

Government Funded Service Provider: an organisation which gets money from the goverment to provide a service.                                                         Charity: an organisation set up to raise funds and to support other people or a cause.                           Sole Trader: a buisness owned by a single person who has unlimited liability.                                       Local Authority funder provider: an organisation that gets money from a local council to provide a service     Private Limited Company: an organisation whose shares are not openly tradedon the stock exchange

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Internal+ External sources of finace

INTERNAL SOURCES OF FINANCE: Retained Profits, Issuing shares, Owners funds, Reducing stock, Selling Assets.

EXTERNAL SOURCES OF FINANCE: Overdraft, Loans, Leasing, Trade Credit, Governments grants, Mortgage, Hire Purchases                                                ___________________________________________

Unlimited Liability: If You go bankrupt you wont have to sell any possesions, Limited liability is the opposite and you would have to sell your possesions.

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