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Finance - Coggle Diagram
Finance
External Finance
Family and friends
Getting the owner(s) family and friends to invest in the business
Advantages
Gives the owner(s) practise in explaining to investors why they should invest
No interest needs to be payed
Disadvntages
Can strain relationships if things go south
Most likely they wont have much to contribute
Banks
Getting the bank to provide you with a loan for the business
Advantages
Able to get large sums of money
Disadvantages
Have to pay intrest back on the loan
Defaulting on the loan is bad if you cant pay
Peer-2-peer
Flexible loans raised from individuals and orgasiations
Advantages
Flexible
Do not need to guarantee personal assets usally
Disadvantages
Not practical for new start ups
Reliant on being able to get a loan from other people and businesses
Business Angels
Investors who invest in the business and give advice in return for part of the business
Advantages
Access to a large sum of money
Access to a mentor who can help you grow with the business
Disadvantages
Lose part of the business
Not really accessible for small businesses
Crowd Funding
Getting a bunch of people to donate/invest in the business, usually from online
Advantages
Lots of different people can donate
Relatively cheap to set up
Disadvantages
Unpredictable
Not suitable for some businesses such as large multinationals or small local businesses
Other businesses
Raising finance by getting loans from other businesses
Advantages
Could be helped by the other business(es)
Common in certain fields like tech
Disadvantages
Dependent on other businesses being kind enough to give you money which is not always
Usually have to give something to the other business inr eturn
Internal Finance
Owners captail/personal savings
Money/cash that the owner(s) invest/put into the business
Advantages
Probanly one of if not he easiest way to gain finance
Can invest as much as needed
Disadvantages
If the business goes bust, the owner(s) loses their investment
Unless you're mega rich the owner(s) probably cannot afford to put lots of money into investing in a business which limits their funds.
Retained profit
Profit made by the business that is then saved for later use
Advantages
Sustainable
No intrest needed
Disadvantages
Business needs to be profitable in order to build retained profit
Can take a long time frame to build up a good amount
Sale of assets
When the business sells something it owns in order to raise finance
Advantages
Quick way to raise finance
Any business can do it
Disadvantages
Can only be done once per asset
Can limit capcity or oppunitites the business could achieve