6.1 Sources Of Finance Flashcards
(18 cards)
What is short-term finance used for?
To help a business maintain a positive cash flow
What is an example a business may use short term finance?
When the cashflow is poor for an icecream seller in winter.
What is trade credit?
A source of finance that allows a business to obtain raw materials and stock but pay for them later
What is credit limit?
The maximum amount of credit available to a business
What is credit period?
The length of the time the business has to pay what is owed like 30 days
What does frequency of payment mean?
How often payment is required
What is personal savings?
Money that has been saved up by an entrepreneur
What is an advantage of personal savings for a business?
No interest charges are applied
What is venture capital?
Money invested by an individual or group that is willing to take the risk of funding a new business
What is share capital?
Money raised by shareholders
What are advantages of share capital for a business
No refunds
No dividends are necessary
What are the disadvantages of share capital for a business?
The business is vulnerable to take over
What is a bank loan?
Money lent to an individual from a bank
Its paid off with interest over an agreed period of time
What is retained profit?
When profit is reinvested into a business in order to expand
What is crowdfunding?
Where a large number of people invest small amount of money into a business
Like GoFundMe
What are the advantages of crowdfunding?
Form of market research
Provides opportunities for people without funding, to start a business
Why can crowdfunding be a form of market research?
If people don’t invest, the business idea is unattractive so theres high risk of failure
What are the disadvantages of corwdfunding?
Business MUST be interesting
Difficult to reach the funding total target
