Unit 1 Revision


Financing a business - Bank Loans

Bank Loans - Borrowing a fixed amount of money from a bank and paying it back over a period of time with interest


- Guaranteed money for the duration of the loan

- Interest charges for a loan are usually lower than an overdraft

- Only pay the loan and interest back, nothing else


- Difficult to arrange as banks will only lend the money if they feel the entrepreneur will be able to pay them back

- Entrepreneur may have to pay a charge if they decide to pay back early

- Repayments can be made difficult for the business if the cash flow is slow

1 of 2

Financing a business - Overdrafts

Overdrafts - Where a bank lets a business spend more money than it has in its account, up to a certain limit.


- Quick and easy to set up as banks can offer them to anyone

- They're flexible as the business only have to pay interest on what they owe and can borrow any amount up to the overdraft limit


- The interest rate is usually high, therefore they're expensive if they're used over a long period of time

- The bank can remove the overdraft limit at any time and demand all the money back immediately 

2 of 2


No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Unit 1 resources »