Internal Finance

• Owners capital = money invested by the owner of a business
• retained profits = profits retained by the business
• sales of assets = when a business sells items that they no longer need for example machinery or transport
• Advantages of internal finance:

  • Internal finance is often free 
  • It does not involve third parties
  • Internal finance can usually be organised very quickly and without significant paperwork
  • Businesses that may fail credit checks can access internal finance sources more easily
• Disadvantages of internal finance:

  • There is a significant opportunity cost involved in the use of internal finance
  • Internal finance may not be sufficient to meet the needs of the business
  • Using an internal finance method is rarely as tax-efficient as many external methods