external finance - 2.1.2

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  • Created by: indree
  • Created on: 19-04-17 13:34

External finance

This is money raised outside the busines. which may be difficult for a start up business as they have no track record, this can pose a problem to lenders as they may be a risk. However after pasing the uncertain stages of the business this becomes a posibility.

Sources of Finance

Family and Friends: The source is cheap and can be low on interest as it is a loan. some cases the money is a gift from older memebers for start up companys. ADVANTAGE - the family member may not want a stake of the business although they can interfer with the runnings of it also the loan could lack clarity and arguments can breakdown family relations.

Banks: These can include Loans, overdrafts and mortgages. Businesses will need an account to legally transact everything within their business. although a  business may need to see a Business plan to see how plausible it is.

peer-to-peer-lending: this is where indivduls lend to each other without prior knowledge of them on the internet. DIS - all payments are unsecured and have no protection, all transactions take place online, charge one percent. AD -  interest rates are better and this is good for the borrowers and lenders, it is convenient and quick.

Business angels: these are people who typically invest a certain amount of money for a stake in the business normally at the beginning of a start up company. The angels are hard to find as you need to make sure they have the same ideas about the business as you do but sometimes all they need is a financial help and no relation to the

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