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2.1 Raising Finance - Coggle Diagram
2.1 Raising Finance
2.1.2 External finance
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Methods of finance
Loan - This could be a bank loan or a loan from family and friends. They do not dilute shareholdings, but repayments are frequently needed to comply with the loan so the money is all paid bank eventually
Share capital - These are funds raised by issuing shares in return for cash, a method only available for a limited company. No interest needed, but costly as the dividend goes to the shareholders
Venture capital - Money invested into a business where there is an element of risk, e.g a business angel. They have money available and ready to use, but a large sum of profits will need to be paid to the business angel to comply with the agreement
Overdraft - This is where a bank allows a business to take out more money that there is in it's bank account. A short-term finance solution where the business needs cash quickly
Leasing - This allows a business to use an asset for a specific time period in return for regular payments. It uses relatively small funds for an asset over a short time period, but the business will never fully own the asset, hence the monthly payments
Trade credit - This is where suppliers deliver goods and are willing to wait for a number of days before payment e.g 90 days
Grant - Money given to a business looking to get started. The money does not need to be paid back, but there is specific criteria needed in order to comply for a grant
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