Chapter 25 - External Finance Flashcards
(15 cards)
What is a Loan?
Borrowed money that must be repaid with interest.
Loans can vary in terms, including interest rates and repayment schedules.
What is an Overdraft?
A facility allowing a business to spend more than is in its account.
Overdrafts are typically subject to interest and fees.
Define Venture Capital.
Investment from investors in return for equity in high-risk businesses.
Venture capital is often sought by startups and early-stage companies.
What is Share Capital?
Money raised by selling shares in the business.
Share capital can be used for various business needs, including expansion.
What does Leasing refer to?
Renting equipment or property instead of buying it.
Leasing can help businesses manage cash flow by avoiding large upfront costs.
What is Crowd Funding?
Raising finance from many small investors via online platforms.
Crowd funding often involves presenting a project or business idea to attract small contributions.
Define Peer-to-peer Lending.
Loans from individuals matched through online platforms.
This method connects borrowers directly with lenders, often reducing costs.
What are Government Grants?
Funds provided by the government that do not need to be repaid.
Government grants are often aimed at specific sectors or initiatives.
What is Debt Factoring?
Selling unpaid invoices to a third party for immediate cash.
This practice helps businesses improve cash flow by converting receivables into cash.
Who is a Business Angel?
Wealthy individuals who invest in small businesses.
Business angels often provide not just funding but also mentorship and advice.
What is a Mortgage?
A long-term loan secured on property.
Mortgages typically involve regular payments over many years and can vary in interest rates.
Define Hire Purchase.
Buying an asset in instalments while using it.
The ownership of the asset is transferred to the buyer after all payments are made.
What is a Debenture?
A long-term loan to a business with fixed interest.
Debentures are often secured against the company’s assets.
What is Equity Finance?
Raising capital by selling shares.
Equity finance dilutes ownership but does not require repayment like debt.
What is an Interest Rate?
The cost of borrowing money.
Interest rates can be fixed or variable and significantly affect loan costs.
