SOURCES OF FINANCE

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  • Created by: _Holly98
  • Created on: 05-04-16 12:06

SOURCES FINANE

SOURCE FINANCE = THE WAY IN WHICH BUSINESS RAISED MONEY NEEDS FUND ACTIVITIES

INTERNAL SOURCES ALREADY EXIST WITHIN BUSINESS - ONLY REQUIRE DECISION

EXTERNAL SOURCE FUNDS INJECTED OUTSIDE BUSINESS E.G. BANK LOAN

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INTERNAL SOURCE

RETAINED PROFITS - SHORT TERM

REMAINS MAJOR SOURCE FINANCE - USES PROFITS SOURCE 

AVOIDS PAYING INTEREST LOAN 

AVOID SELLING FURTHER SHARES = MORE CONTROL

LOSE OUT NOT USING ANOTHER WAY

ONLY AVALIABLE MAKING PROFIT

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INTERNAL SOURCE

SALE ASSETS - LONG TERM

SELL ASSETS NO LONGER REQUIRE - RAISE BIG SUM

NOT FUTURE INTEREST PAYMENTS

LEASE BACK

LOSE ACCESS

PAY RENT PREVIOUSLY FREE - NEGATIVE LONG TERM PROFIT

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INTERNAL SOURCE

RETAINED PROFITS - LONG TERM

USE PROFIT PREVIOUS SOURCE FINANCE

USING PROFIT = NO INTEREST LOANS

AVOID SELLING SHARES = KEEP CONTROL

NOT ABLE USE PROFIT OTHER WAY

SHAREHOLDERS RECIEVE LESS

ONLY WORK IF MAKING PROFIT

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EXTERNAL SOURCE

OVERDRAFTS - SHORT TERM

BANK ALLOW BUSINESS BORROW AGREED LIMIT AS LONG AS WISHES

FLEXIBLE

SIMMLY ARRANGE

EXPENSIVE INTEREST 4 - 6& LONG TERM PROBLEM

DEMAND IMMEDIATE PAYMENT

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EXTERNAL SOURCE

DEBT FACTORING - SHORT TERM

SELL BILLS IMMEDIATE CASH

IMMEDIATE CASH = LOWER OVERDRAFT

RECIEVE CASH SALES MORE QUICKLY

LOSE 5% EARNING = ELIMINATE PROFIT MARGIN

CUSTOMERS WORRY INCAPABLE MANAGE FINANCE - SEEK OTHERS

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EXTERNAL SOURCE

VENTURE CAPITAL - LONG TERM

IMPORTANT SMALL RISKY BUSINESS

MIX LOAN & SHARE CAPITAL

EXPERIENCE ADVICE WHEN REQUIRED

PROVIDERS NOT ADVANCE HUGE AMOUNT

SIZE DEAL REFLECTS POTENTIAL

PROVIDERS WISH SOME CONTROL

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EXTERNAL SOURCE

SHARE CAPITAL - LONG TERM

SELLING SHARES INVESTORS - EXPENSIVE APPROPRIATE IF RASING LARGE SUM

SELL FREELY / STOCK EXCHANGE

PAYMENTS NOT FIXED - RAISE LARGE SUM

ONLY AVALIABLE COMPANIES (PRIVATE SEEK PERMISSION)

POTENTIAL LOSS CUSTOMERS

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EXTERNAL SOURCE

BANK LOAN - LONG TERM

LOAN ARRANGED BUSINESS SEEKING FINANCIAL CREDIT

SET FIGURE REPAYMENT OVER TIME

VARIABLE OR FIXED

LOAN RISKY - CHARGE HIGH INTEREST

COLLATERAL USED - STOP PAYING SELL LAND

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EXTERNAL SOURCE

MORTGAGE LONG TERM LOAN (LAND)

SUITABLE RAGE LARGE SUM

PAID LONG PERIOD TIME

DEBENTURE  LONG TERM LOAN REAPID FUTURE

RATE RIXED -  NO REPAYMENT DATE

SECURED NON-CURRENT ASSETS COLLATERAL

HOLDERS DONT VOTE

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CROWDFUNDING

PRACTICE FUNDING PROJECT RAISING SMALL AMOUNTS MONEY LARGE NUMBER PEOPLE E.G VIA INTERNET

CHEAP

RELEVANT UK BANKS REDUCE SHORT TERM LENDING

UNFAMILIAR SOURCE MANY MANAGERS

NOT SUITABLE LARGE AMOUNT CAPITAL

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SOLE TRADER

SOURCES:

OWNERS SAVINGS

GOVERNMENT GRANTS & LOANS

ISSUES:

SECURITY THOSE LENDING

LOSS CONTROL OWNER

EVIDENCE POTENTIAL DEVELOP / FINANCIAL HISTORY

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PRIVATE LIMITED COMPANY

SOURCES:

SUPPLIERS, BANKS, GOVERNMENT

VENTURE CAPTALISTS, PRIVATE SHARE ISSUES

ISSUES

DISAGREEMENT / HARD FIND NEW SHAREHOLDERS

SHAREHOLDERS LOSS CONTROL

LACK COLLATERAL LENDING

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PUBLIC LIMITED COMPANY

SOURCES:

SUPPLIERS / BANKS /  GOVERNMENT / LOANS

VENTURE CAPATILISTS / PUBLIC SHARE ISSUES VIA STOCK EXCHANGE

ISSUES

STATE ECONOMY / STOCK MARKET

RECENT FINANCIAL PERFORMANCE

ABILITY MOVE AREA RECIEVE GOVERNMENT AID

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COST SOURCE FINANCE

RATE INTEREST - SIGNIFICANT INFLUENCE ESPECIALLY LARGE LOAN. SHORT TERM HIGH RISK = HIGHER INTEREST

COST SELLING SHARES - PUBLIC LIMITED COMPANY - GOOD OPTION - EXPESNIVE - CONSIDERABLE ADMINISTRATION & PROMOTION

OPPURTUNITY COST - DECISION PARTICULAR SOURCE FINANCE COST TERMS WHAT GIVEN UP CONSEQUENCE DECISION

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FLEXIBILITY

SOME SOURCES HIGHER FLEXIBILITY 

ADAPT BUSIINESS PRECISE NEEDS

E.G. OVERDRAFT

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CONTROL

SOME SOURCES = REDUCE / LOSS CONTROL

SMALLER BUSINESS DONT TRADE AS COMPANIES IF USE VENTURE CAPATALISTS

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CONTROL

SOME SOURCES = REDUCE / LOSS CONTROL

SMALLER BUSINESS DONT TRADE AS COMPANIES IF USE VENTURE CAPATALISTS

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CONTROL

SOME SOURCES = REDUCE / LOSS CONTROL

SMALLER BUSINESS DONT TRADE AS COMPANIES IF USE VENTURE CAPATALISTS

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PURPOSE FOR WHICH IT IS NEEDED

SOME SOURCE FINANCE SUITABLE SOME SITUATIONS

E.G. PROPERTY GO FOR LOAN

FINANCE RAISED FUND RISKY START UP HARD FIND INVESTORS THEN INVESTOR CAPATALIST

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