Internal and external sources of finance Flashcards
Internal sources of finance? (3)
Retained profits
Friends and family
working capital
External sources of finance? (7)
Business angels loans grants crowd funding overdraft share issue venture capital
What is a business angel?
A person who provides financial backing for a business which can be a 1 time investment or multiple in exchange for equity
What are retained profits?
Profits invested in the business
Benefits of reviving money from family/friends?
No/Little interest
Drawbacks of reviving money from family/friends?
hard to persuade
Personal fallout
What is working capital?
current assets - current liabilities = WC
Benefits of business angels?
No repayments
Knowledge and contacts
Drawbacks of business angels?
Hard to find
loss of control
Benefit of a loan?
Low interest
long time to pay back
Drawback of a loan?
interest to pay
unlimited liability
Benefit of a grant?
No repayment
reduce unemployment
Drawback of a grant?
Only accessed by companies that are ethical
Benefit of crowdfunding?
No interest
No repayment
Drawback of crowdfunding?
Long time to raise
have to reach target
Benefit of overdraft?
Flexible
help cash flow
Drawback of overdraft?
high interest
What is share capital/issue?
Investors invited to buy shares in business
Benefits of share issue?
Gain money world wide
Large amount raised
Drawback of share issue?
loss of control
could be taken over
What is a venture capital?
Person who invests in business in return for percentage of business ownership and profits
Benefits of venture capital?
knowledge and contacts
Drawbacks of venture capital?
investor has control
loss of control
Benefit of trade credit?
Slows down out flows
less likely to go bankrupt
