sources of finance

Question 1

what is equity finance

Answer 1

The funds contributed by the owner(s) to start and expand their business.

Question 2

what is a pro and con of equity finance

Answer 2

Does not have to be repaid unless the owner(s) leaves the business.

The owner(s) may expect a good return on their investment, but a small amount of finance will only generate low profits and low returns.

Question 3

whats the internal source of funds in equity finance

Answer 3

self funding
family or friends
private investors

Question 4

what are the pros and cons of equity finance self funding or bootstrapping

Answer 4

No need to share ownership with anyone else.

High risk of losing the investment should the business fail.

Question 5

what is a pro and con of family and friends in equity finance

Answer 5

Easy, quick option to obtain extra or last-minute funds.

May need to share profits in return.

Question 6

whats debt finance external

Answer 6

The funds provided by banks, other financial institutions, the government, and suppliers, that must be paid back over time with interest.

Question 7

whats a pro and con of ecternal debt finance

Answer 7

increased earnings from borrowed funds

to expensive because of interest

Question 8

what are government grants

Answer 8

Funds provided by the federal and state governments for business development, especially to promote exports.

Question 9

whats a pro and con of government grant

Answer 9

Can enhance the business’s public profile and credibility, thereby attracting potential

The application process can be complex, time consuming, and competitive.

Question 10

factors affecting choice of finance

Answer 10

terms of finance
business structure
overall cost
flexibility
level of control