U1 AOS2/KK7: Sources of finance Flashcards
internal
within the business that have direct impact on business. owners have most control over eg. retained profit
external
outside the business from private companies individuals and government eg, bank loans, debt factoring
short term
repayment within 12 months
long term
repayment 3+ YEARS
internal exampkes
retained profits (S+L)
owner savings (S+L)
sale of assets (L)
external eg
debt factoring (S)
overdrafts (S)
sharecapital (L)
loans (L)
venture capital (L)
crowd funding (L)
owner savings
(S+L) $$ injected into bus from owners own pockets
retained profits
(S+L) a profit kept and reinvested from prev years success
sale of assets
(L) items a bus owns and uses repeatedly for 1+ yr in main operations eg machinery and vehicles
- if a firm wishes to free up finance they could agree to sell asset then lease ti back from its new owner for an agreed period of time (SALE AND LEASEBACK)
debt factoring
(S) service were bus sells its debts which have not been collected from another company (invoices) to a 3rd party at a discount, in exchange for immediate $$
overdrafts
(S) allows a bus to overspend on its current account to an agreed limit
share capital
(L) $$ given to a company by private individual in exchange for a share certificate giving them part ownership in the limited company
loans
(L) a sum provided to an ind/bus for an agreed purpose
LOANS
mortgage
debenture
mortgage - long term loan (20-30years) taken out on property lower interest rates than other loans
debenture - long term loan w fixed interest rate
venture capital VC
(L) $ prov to a S-M sized bus that seek growth to initial investment and may be considered as a risky investment by share buyers or banks
