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Sources of Finance (External Source of Finance: Is money coming out from…
Sources of Finance
External Source of Finance:
Is money coming out from the business
Crowdfunding
Is when you get money donated by people for some financial reward (LT) For modern attractive businesses
Venture Capitalist
is when a person pay a business in return of a percentage of shares - money is not payed back (LT) For new businesses, small in particular
Trade credit
Is when you have an agreement where you receives the product bur you don't pay until 30-90 days (ST) For A long stablished business
Credit cards
Business uses when they got to pay small amount of money (ST) For all businesses
Bank loan
Is when the business borrow money from the bank and need to be repaid + interest (LT) For all businesses
Overdraft
is an agreement between the business and the bank that the business can spend more than what is has on its account (ST)
Relatives savings
For small businesses such as sole traders, partnerships, etc
Sales of Share
when selling shares to the public to earn finance for investment (LT) Mainly for PLC and LTDs
Reasons to have source of finance
payoff debts
Pay a bank loan
Pay suppliers
to purchase new technologies
everyday running of the business
Wages
Large bills (lights, water, electricity, etc)
Raw Materials
To expand the business
by setting up more branches
Increase the number of franchises
Become a multinational
To merge or fund a takeover
Internal Source of finance: Is when the money come from inside the business
Lease of assets
When you rent your assets to earn some money (ST)
Retained Profits
It is the savings from previous years (ST & LT)
Sales of Assets
Selling anything with a monetary value (ST)
Short term sources of finance
Every day running the business
Payoff bills
Long term sources of finance
Expand the business
