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BS - Sources of Finance - Coggle Diagram

- - - - Advantage- Permanent source of capital which does not have to be repaid.
      - Disadvantage- Dividends are paid after tax deduction, whereas bank loans have to be paid before tax reduction.
    - - Advantage- Larger companies are often offered loans at lower rates of interest if they want to borrow a larger amount of money.
      - Disadvantage- Interest rates of the loan only add more weight onto the profits to be made.
    - - Advantage- Used to raise capital for very long time frames.
      - Disadvantage- Just like loans, these must be repaid eventually, along with additional interest rates.
    - - Advantage- Government grants are not supposed to be repaid.
      - Disadvantage- May have additional conditions attached when provided to the company.
  - - - Advantage- The business can benefit from the asset without purchasing it.
      - Disadvantage- If leasing is done for a long time, cost of leasing may become higher than cost of purchasing asset itself.
    - - Advantage- A large sum of money does not have to be immediately arranged by the company to buy the asset.
      - Disadvantage- Includes an interest rate, so total amount paid will be greater than if it was paid for all at once.
    - - Advantage- Loan is paid off quicker than long-term loan.
      - Disadvantage- Higher rate of interest may be charged since the company is borrowing for a shorter period of time.
  - - - Advantage- No need for security deposit and amount can be adjusted every month.
      - Disadvantage- Interest rates on excess withdrawal are higher than loan interest rates.
    - - Advantage- Material obtained without any interest rate and longer time frame for payment.
      - Disadvantage- If customers do not pay within grace period, no funds may be present in business in time of need.
    - - Advantage- Business gets access to instant cash.
      - Disadvantage- Business only receives 90% of the amount due, since the debt factoring agency keeps 10% as profit from debtor.