Sources Of Finance

kept in the business to fund future expenditure

(revenue - expenditure)

No interest charges
available immediately
no loss of ownership (control)
only available up to the amount already accumulated by the business and therefore avoids debts

Amount available may be limited
reduces payments to shareholders which may cause dissatisfaction
once used it is not available for alternative purposes
once used it is not available for alternative purposes

(Current assets - current liabilities) shows the money available in the business to fund day to day expenditure

Encourages the business to manage cash flow effectively

Can put pressure on Custer’s as shorter credit terms are offered and this negatively affects relationship with suppliers it longer credit terms are negotiated
lower stock holdings can affect the firms ability to meet customer needs

No interest charged
reduced capital tied up in assets , releasing it for other purposes
can mean disposing of an asset no longer in use to the business

It is likely that the amount received is not a true reflection of the value of the asset
can increase costs in the long run if an asset needs to be leased back

Money invested in the business from the owners own personal savings

No interest payments or need to repay
High level of commitment form the owner

amount available is likely to be limited
if there is more than one owner this could cause friction if everyone is not able to contribute the same amount

Regular pre-agreed repayments make planning and budgeting relatively easy
ownership or control is not lost

Interest is charged on the amount borrowed
interest rates can fluctuate
often secured against an asset which can be seized if repayments are missed
interests has to be paid regardless of wether a profit is being made

Attracting investment from a large number of speculative investors many of whom may invest relatively small amounts

Offers the ability to raise finance from a large number of investors
no interest is paid as investors will only be rewarded if the business is successfully sold on at a later date

Partial loss of ownership
no guarantee that the crowd fund will attract sufficient investment to meet the proposal

Long term loans, normally around 25 years, that are secured against a specific asset e.g a building

Large amounts of finance can be raised and repaid over a pro-longer period of time
ownership or control is not lost

Interest is charged on the borrowed amount
intrest rates can fluctuate
often secured against an asset which can be seized if repayments are missed
interest has to be paid regardless of wether a profit is being made
not suitable for small amounts or as a short term source of finance

This involves one business lending money to another business person in return for intrest payments

Interest rates can be lower than lending from more traditional financial institutions
fixed rate of intrest cab be agreed making it easier to plan and budget

Amounts available may be limited and provided for a short period of time only

Investment from an experienced entrepreneur in return for a stake in the business

Finance is provided by a business professional who will often offer advice and mentoring alongside the investment
venture capitalists are often risk takers and may see the potential in a high risk investment that other investors inclouding banks may not be willing to invest

Partial loss of ownership and control
conflict can arise between the entrepreneur and venture capitalists regarding the direction and day to day running of the business