finance: sources of finance Flashcards
short term sources of finance
- retained profit
- sale of an asset
- government grant
- bank overdraft
- trade credit
- factoring
retained profit
this is the amount of profit held back by the company
sale of an asset
the firm will sell of a piece of equipment that it is not using
government grant
this is a lump sum of money that the firm applies for from the government which does not need to be paid back
bank overdraft
the bank allows the firm to exceed the funds they have in the bank
trade credit
a supplier will deliver supplies to the firm and allow them to pay for the goods at a later date
factoring
a firm will collect together all outstanding debts and sell them on to another firm
medium term sources of finance
- hire purchase
- leasing
- bank loan
leasing
the firm rents a building or piece of equipment for an agreed period of time
hire purchase
a firm will hire equipment and pay for it in instalments. after the last payment the firm takes ownership of the good
long term sources of finance
- mortgage
- owner’s savings
- crowd funding
- share issue
- venture capitalist
- debenture
bank loan
this is a lump sum of money borrowed from the bank to be repaid in instalments with interest
owner’s savings
this is the funds saved by the owner and invested in the business
mortgage
this is a loan given to firms who wish to purchase premises and is repaid in instalments with interest
share issue
the firm releases more shares to existing or prospective shareholders
