Sources of Capital
Internal Finance
Working Capital
Retained Profit
Sales of Assets
Owner's Funds
External Finance
Short Term
Is the amount that businesses can safely spend without in risk of not being ablt to pay debt
Usually only a small amount to allow for more money to be spent on the day to day operations of the business
Can always use this money because it is safe to spend
Long Term
Selling things that the company owns
You lose things that the business owns and this decreases the value of the business
Allows you to get money quickly by getting rid of assests you dont need at the moment
There is a greater financial risk for the owners. Business owners can be willing to face risks, some even use their personal credit cards to pay business expenses
A sole trader or members of a partnership may inject more of their own money into the business
It provides a quick, interest-free source of funds
Once a business makes profit, it can use the profit as a source of finance. 'Ploughing back' profit into the business has the advantage of avoiding the costs of external finance.
It is not always available. Owners receive less reward for the risk.
It provides an interest-free source of funds
Debt Factoring
Trade Credit
Over Drafts
You get money quickly when you need it
You wont get 100% of what the person owes you
You have more time to pay for the supplies and this gives you the chance to sell the supplies you buy to make revenue that you can use to pay for the supplies
You need to buy from the same place constantly to get good trade credit and this can be hard if you are fine tuning your product
You are able to spend more money then you have at the moment allowing for bigger purchases that can lead to more revenue
If you don't pay the Overdraft in time then they will stop giving you overdrafts and trusting you with money
Selling your unpaid customer invoices (accounts recivable) for a percentage of the total invoice to get the money sooner.
A longer amount of time to pay for supplies you get from a supplier
An extension of credit that allows you to go into negitive numbers for your bank account
Debentures
Grants
Venture Capital
Bank Loans
Hire Purchase
Sales and Leaseback
Leasing
Share Issue
A long term rent that is common with cars or land
You don't own it as an asset to your business and therefore you cannot liquify it if you need money
You are able to have somthing without needing to pay full price for it
Allows you to work up to paying for the large total at the end
When buying expensive items you can make a downpayment and then pay monthly over time to give you more time to get the right amount of time
There is some intrest charged making you pay a little bit extra
You get investors that can help fund your growing business and idea
A firm that helps small businesses grow by giving them money and investing in them to help them grow.
The firm might ask for a royalty fee in return for investing
A large, long term loan taken from the bank that is at a fixed rate of intrest
The payments can last on average 10 years making you have to pay the loan off for a very long time
You can get a large amounf of money for a stable intrest rate that will help you expand and then make profit to pay off the loan
A small sum of money given by the government to startup businesses
You need to apply for the grant and the government wont give out many grants at all so it can be hard to get one
The money can be very useful to help you expand and grow faster
Releasing new shares into the market that can be bought and sold
If someone buys a large enough number then they might have majority of the shares making them own the business
You are able to make money for doing nothing if people buy your shares
An amount of money borrowed from the bank that is charged with intrest
You will have to pay it back with intrest eventually so if you dont make profit with the loan then youll have to work very hard to pay it off
Its a quick way to get some money fast to help expand your business
Selling something and then leasing it back from the person
It is no longer your assest making your business less liquid
Doing this allows for you to keep using the assest but also to get some money from selling it