Sources of finance

What might a business need finance for?

  • Equipment
  • Start-up costs
  • Wages
  • Advertisment
  • Vehicles
  • Electricity
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Types of finance

Internal source of finance = from within the business e.g. savings

External source of finance = from outside the business e.g loans

Short term = 12 months or less e.g. bills, stock

Long term = 2 years or more e.g. start-up, expansion

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Reasons for finance

  • Paying expenses such as wages - short term
  • Expanding the business - long term
  • Investing in new product / service - long term
  • Starting a new business - long term
  • Paying any unforseen costs - short term

Bank overdraft = allow your bank account to become overdrawn to certain amount

Trade credit = a buy now pay later service in 30 to 60 days time

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Long term sources of finance

  • Personal savings = owners savings
  • Venture capital = investment from a venture capitalist
  • Share capital = equity raised from selling shares
  • Loan = money borrowed from a bank
  • Retained profit = money after shareholders and tax has been paod
  • Crowd funding = funding for a project from large number of people in the public
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