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Sources of finance - Coggle Diagram
Sources of finance
Finance
Definition: money
Sources of finance
Where do you get the money from
Examples of sources of finance
crowdfunding
venture capital
overdraft
sales
loans
why does a business need finance
pay rent
pay employees
to buy new equipment
starting a business
to expand
this is the main use of finance in a business
expansion is used for
develop new products
branch to other markets
expand capacity of a businessa
diversify
buy stoks
There are different times when finance is needed
long term need
money needed in a span of more hta a year
start -up capital
to start a business
short-term needs
Money needed in a span of less than a year
expansion
when the business wants to get bigger
Types of finance
There are 2 main types of finance
Internal
Money that is obtained inside the business
examples of internal finance
personal savings
most common with sole traders and partnerships
This is money that the owner has made, then the owner puts the money inside the company. This can be really useful to start a business
selling assets
Selling a product or a service to the customer
retained profits
Money kept inside the business.
most common with larger companies
start-up capital
The money that is put inside the business to start it
Normaly contains the cost of items only bought one time in many years.
external
Money obtained from the outside of the business
examples of external sources of finance
short-term
credit card
debit
works like a wallet(if you have the money you can buy it)
credit
works like a loan for each month
bank loans
Money given by the bank
Each month that passes the bank adds an interest to the loan
A fee a business pays to the loaner to borrow money
Each loaner has a different interest rate (percentage)
Bank overdraft
This happens when you make a transaction but you don't have the sufficient money
This puts you on a debt with the bank which has an interest rate
Advantages and disadvantages
D
Interests (really expensive)
You owe money to the bank
A
You can pay more money than you have
long-term
mortage
Loans that take a really long time
Share capital
The money the business makes by selling its stoks
Venture capital
Money that is given to a small business with lots of potential to start it
The person who pays for a percentage of the company will own a percentage of it.
Done by professionals, they are called business angels
Crowdfunding
When you asks potential customers to give you money to start the company
The potential customers who pay for this will probably get an advantage when the product gets out.