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3.1 SOURCES OF FINANCE (FACTORS TO CONSIDER (Use and time period for…
3.1 SOURCES OF FINANCE
IMPORTANCE
OF FINANCE
Start-up capital to set up business
Finance the working capital
Business expansion
Research and development
FACTORS TO
CONSIDER
Use and time period for which finance is required
Cost
Amount required
Legal structure and desire to retain control
Size of existing borrowing
Flexibility
CAPITAL EXPENDITURE &
REVENUE EXPENDITURE
Capital expenditure: the purchase of assets that are expected to last for more than one year
revenue expenditure: spending on all costs and assets other than fixed assets and include wedges and series and materials for for stock
SOURCES OF
FINANCE
Internal sources
Personal finds for sole traders
Profit retained in the business
Sales of assets
Managing working capital more efficiently
External sources
Short-term finance
Bank overdrafts
Trade credit
Debt factoring
Medium-term finance
Hire purchase and leasing
Medium-term bank loan
Long-term finance
Long-term loans from banks
Debentures
Sale of shares
Grants
Venture capital
Business angels
Subsidies
Microfinance