Theme 2 - 1.2 External finance

Question 1

What are the different sources of finance ?

Answer 1

• Family and friends.
• Bank loans.
• Peer to peer funding (Unsecured loans that do not go through a bank).
• Angel investor (a type of equity finance)
• Crowd funding (raising money from a large pool of people who contribute a relatively small amount)
• Through other businesses.

Question 2

What are the different methods of finance ?

Answer 2

• Bank loans (long term finance)
• Share capital.
• Venture capital (venture capitalists will invest large sums of money into business in return for equity in the business).
• Overdrafts (short term finance from banks which is extremely expensive).
• Leases
  -Trade credit (get goods in advanced and pay later).
• Government grants (subsidy)