sources of finance Flashcards
(7 cards)
owners capital advantages/disadvantages
✅
•No interest charges to pay.
•100% ownership and control of the business.
•Receive 100% of all future profits.
❌
•Could strain personal/family finances.
•May not be enough to get business going.
•No mentor support-need to build own networks.
bank loans advantages/disadvantages
✅
•Keep control of your business.
•Cash injection to buy assets.
•Repaid over time period.
❌
•No flexibility in repayments.
•Could cause cash flow issues.
•May be secured against business/owners’ assets.
overdraft advantages/disadvantages
✅
•Flexible – only borrow what you need.
•Quick to arrange and access.
•No charge to pay off early.
❌
•Extra charges if exceed agreed amount.
•Can demand repayment in full anytime.
•Variable interest rates on balances
credit cards
✅
•Easy over the phone/online purchases.
•Interest free periods of up to 56 days.
•Easier admin – all payments via one bill
❌
•Authorised employees, unchecked spending.
•Easier to get into debt as usage is extended.
•Must honour all charges even if not business purchases
suppliers credit
✅
•No cash required up front/helps cash flow.
•Supports business growth/pay after trading.
•Offer discounts for bulk buying stock/inventory.
❌
•Charges penalties and interest for late payment.
•Will take legal action if payments not made.
•May refuse to work with business of poor payment history
venture capital
private finance offered by investors to start-up, early stage and emerging business showing potential for high growth.
•advantages
Large amounts of money can be raised
Introduces leadership/tech expertise
No monthly repayments/expenses
•disadvantages
rapid growth expected
founders can loose business
reasons to raise finance
Start up: for premises, equipment advertising.
•Running costs: staff wages, pay bills, suppliers.
•Expansion: open new sites, new markets, products
•Innovation: research and development, new products.
•Competitive: stay ahead of their competition in different markets.
