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sources of finance - Coggle Diagram
sources of finance
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
rare, most likely to be used for particularly risky start ups
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
rare, most likely for a start ups or new businesses offering rewards
BANKS= loans to start ups are v risky = ask for collateral as a secutiry
eg business asset or personal asset to owner
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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
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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
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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
rare, only a few businesses are likely to offer
internal sources
RETAINED PROFIT= money left after all dividend paid to shareholders and costs paid off
safest and most common for established businesses
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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
only for established businesses = look for those planning to do something new = existing assets redundant = available to sell
OWNERS CAPITAL= personal savings = used to start up business = can be provided in form of share capital or lent to business as loan
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