Please enable JavaScript.
Coggle requires JavaScript to display documents.
3.5 Finance - Coggle Diagram
3.5 Finance
-
-
-
5.3 Sources of finance
Internal Sources
- Founder Finance
- Retained Profits
- Friends and Family
External Sources
- Bank Loan
- Bank Overdraft
- Business Angels
- Loans and Grants
Founder Finance
- Cash and Investments
- Redundancy payments
- Inheritances
- Personal credit cards
- Re-Mortgaging
- Putting time into the business for free
The most important and significant source of finance for an established, profitable business
A debenture is a form of bond or long-term loan which is issued by the company, usually with a fixed rate of interest
- Long-term: often 10-20 years
- Issued by the company (not a bank)
- Fixed rate of interest
- Usually secured against the assets of the company (provides some protection for debenture holders)
Venture capital
Advantages of venture capital
- Can raise substantial amounts
- Business benefits from specialist investor support
- Brings better discipline to business management & strategy
- Helps original business owners realise their investment
Disadvantages of venture capital
- Venture capitalist requires a high rate of return
- Investment often supported by a high level of bank debt in business
- Not a long-term investment – venture capitalist will aim to sell within 5-7 years
- Loss of control – venture capitalist may take a majority share in company