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How can businesses raise the funds they need? - Coggle Diagram
How can businesses raise the funds they need?
Bank Loan
External
Advantages
Easy and quick to access
Can get a significant amount of money at one time
Disadvantages
Difficult for a new business to access
Have to pay interest
A form of credit which is extended for a specified period of time
Venture Capital
External
Advantages
Potential to raise huge amount of money
They may offer advice and help
Gain money quickly
Disadvantages
Owner must give away part of the business
They may have a different vision for the business than the owner does
Capital invested in a project in which there is a substantial element of risk, typically a new or expanding business.
Hire Purchase & Leasing
External
Advantages
Expensive assets can be purchased and paid back over time
No large upfront payments
Disadvantages
Assets aren’t owned by the business
Interest is charged on hire purchase items
Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments.
Owners Capital
Internal
Advantages
No interest payments to make
Quick and convenient
Doesn’t require borrowing money
Disadvantages
Once the money is gone, it’s gone
The owner might not have enough savings or may need the cash for personal use
when the owners of the business invest money in the business.
Retained Profit
Internal
Advantages
Easy access to the money
No interest payments to make
Quick and convenient
Disadvantages
Once the money is gone, it is not available for any future problems the business might face
Sale of Assets
Internal
Advantages
Can be quick
Raise money from unused equipment
Can create space for more profitable uses
Disadvantages
Might need the assets in the future
Might not get the full market value of the assets or even be able to sell them at all
An asset sale is completed only when the assets) of a company are acquired by a buyer.
New Partners
External
Advantages
Potential to raise huge amount of money
They may offer advice and help
Easy way to gain money
Disadvantages
Owner must give away part of the business
They may have a different vision for the business than the owner does
Share Capital
External
Advantages
Can gain lots of money quickly
Nan gain lots of money quickly
Disadvantages
Give away part of the business
Leaves a business open to takeovers
This is where the business sells share in the company
Government Grants
External
Advantages
Available to small businesses
Does not need to be paid back
Disadvantages
Business needs to meet certain criteria
It is time-consuming to apply for grants and to complete the paperwork
when the business receives a sum of money that does not need to be repaid
Overdraft
External
Advantages
Quick access
Allows emergency purchases
Disadvantages
High interest rates
Is only a short term solution
A bank allows a firm to take out more money than it has in its bank account
Trade Credit
External
Advantages
No interest
Access to supplies without immediate payment
Disadvantages
Usually small amounts
Short term, must be paid off quickly
where suppliers deliver goods now and are willing to wait for a number of days before payment.