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Sources of finance - Coggle Diagram
Sources of finance
Shares
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- Benefits:
- Large amounts of £
- No interest
- Drawbacks:
- expensive to set up PLC
- great deal of administration
- control is diluted
Loan:
- Money is secured against a valuable asset (collateral).
- Mortgage: when aquiring poperty (long term)
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Trade credit:
When a business payes its supplier after getting revenue from using the product provided by the supplier.
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Debt factoring:
A business sells its customer accounts - those with debts - to a debt factoring business who pays 80-90% to the business then collects full amount thus making profit.
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Hire purchasing:
Supplier provides asset, business payes monthly for a set period of time until it is paid back.
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Venture capital/ equity finance:
Venture capitalists look to invest large sums of money in return for equity (share in ownership of the business). They usually look for:
- USP
- High ROI within a specific time
- Ambitious, but realistic
- Drawbacks:
- long & complex process
- detailed business plan, financial projections are required usually
- Benefits:
- VCs have great experience
- large sum
- easier to get additional funding