Please enable JavaScript.
Coggle requires JavaScript to display documents.
METHODS OF FIANCE - Coggle Diagram
METHODS OF FIANCE
OVERDRAFTS
facility offered by bank to allow customer to continue spending money even when their account becomes negative
-
-
have to pay interest on overdraft BUT along as business stays out of its overdraft most of the time the total cost of this method may not be prohibited
ISSUE: only used infrequently a businesses that uses an overdraft as LT finance pay lots of interest back
LOANS
can be provided by banks or friends and family or directors of a business
-provide a large sum of cash that can be paid back over a certain period of time
-
-
ISSUE: some collateral needed and starts up find it hard to negotiate a loan with appropriate interest rates
VENTURE CAPITAL
-
-
-
ISSUE: only used for higher risk businesses = for small businesses finding a significant spell of growth
TRADE CREDIT
-
-
on average, 2 months is offered to customers as am method of finance the purchase of materials used in production
-
GRANTS
-
-
-
ISSUE: only likely to be relevant a business creating jobs in areas of economic deprivation or very high tech firms trying to compete internationally
LEASING
an assest is an alternative to buying the asset outright = rented for a monthly fee for a set period
-
-
SHARE CAPITAL
when private company is formed the ownership of business is split into shares
-shares can be sold to investors who become shareholders
-share first sold = capital enters business
ISSUE: can only be used by limited companies = sole traders and partnerships cannot sell shares without converting