Sources of finance Flashcards
Government Grant
A government grant is money that is given to a business by the government which does not need to be repaid.
Bank Overdraft
A bank overdraft is when a business takes out more money than it has in its bank account.
Bank Loan
A bank loan is when a business borrows money from a bank and repays it over a specific period of time in regular instalments with interest.
Leasing
Leasing is when a business rents an item. This could be vehicles or IT equipment etc.
Mortgage
A mortgage is a special type of loan which is used to pay for property / land. It is a sum of money borrowed from the bank that is paid back in regular instalments.
Retained Profits
Retained profit is profit that has been made by the business in previous years that is then reinvested back into the company.
Trade Credit
Suppliers allow the business to use goods or services before they pay for them, they agree on a credit period ( normally 20 or 60 days).
Hire Purchase
Hire purchase is used to purchase an asset, such as a delivery van or piece of equipment. A deposit is paid and the remaining amount for the asset is paid in monthly instalments over a set period of time.
Share Issue
Share issue is a source of finance that is only available to private or public limited companies. Such businesses can decide to issue more
shares in the company and obtain finance from their sale.
Loan from Family / Friends
Businesses can obtain a loan from family or friends that may not need to be paid back or are paid back with little or no interest charges.
Crowd Funding
Crowd funding involves getting small amounts of finance from a large amount of people. This is usually done through social media or crowd funding websites.
Owner’s Personal Savings
Owner investment or capital is money that is invested by the owner from their own personal funds.
