sources of finance
internal sources
RETAINED PROFIT= money left after all dividend paid to shareholders and costs paid off
safest and most common for established businesses
SALES OF ASSETS= cash generated by the sales of assets
esp good when business is changing strategy
assets may no longer be needed = sold to generate cash
OWNERS CAPITAL= personal savings = used to start up business = can be provided in form of share capital or lent to business as loan
external sources
PEER-TO-PEER FUNDING= relies on websites that match investors wiling to lend business start up's with start up's needing financne
-have a fairly high interest rate
-good option when banks unwilling
BUSINESS ANGELS= individuals who invest in very early stages of a business taking a significant equity (share) stake
-prvodie capital to high risk small business ventures
-receive high returns
BANKS= loans to start ups are v risky = ask for collateral as a secutiry
eg business asset or personal asset to owner
CROWDFUNDING= obtaining external finance from many small inesvtors
-through CF websites
-no single investor able to provide all finance needed for each business using the site = use many small investors= gather finance neccessary
FAMILY AND FRIENDS= provide extra start up capital necessary for business start ups
either: provide loans or taking an equity stake in a business set up as a limited company
OTHER BUSINESSES= large firms seek out small businesses either starting up or in early stages and help by providing finance
-in return take shareholidng
-common in technology based industries with large tech firms
Limited to small business contexts like start ups
only relevant for start ups/small businesses
must have made profit and not spent on anything else = not for start ups
only for established businesses = look for those planning to do something new = existing assets redundant = available to sell
most applicable but still hard to get sources of finance from banks with good interest rates
rare, most likely to be used for particularly risky start ups
rare, most likely for a start ups or new businesses offering rewards
limited to start ups
rare, only a few businesses are likely to offer