SOURCES OF FINANCE

• What is an instalment?

  one of a series of regular payments made until all the money owed has been repaid
• What is short-term finance?

  money borrowed for one year or less
• What is long-term finance?

  money borrowed for more than a year
• What is capital?

  finance provided by the owners of a business
• What is internal finance?

  finance generated by the business from its own means
• What is retained profit?

  profit held by a business rather than returning it to the owners, which may be used in the future
• What are assets?

  resources used or owed by a business, such as cash, stock, machinery, tools and equipment
• What are some internal sources of finance?

  • personal savings
  • retained profit
  • selling assets
• What is external finance?

  finance collected from outside the business
• What are some external sources of finance?

  • bank overdraft
  • trade payables
  • credit cards
  • loan capital
  • share capital
  • venture capital
  • crowd funding
• What is bank overdraft?

  an agreement with a bank where a business spends more money than it has in its account (up to an agreed limit)
• What are trade payables?

  buying resources from suppliers, such as raw materials and components and paying for them at a later date (sometimes called trade credit)
• What is a mortgage?

  a long-term loan secured with a property
• What is debenture?

  long-term security giving a fixed rate of interest, issued by a company and secured against assets
• What is hire purchase?

  buying specific goods with a loan, often provided by a finance house
• What are rights issued?

  a sale of new shares to existing shareholders at a discount
• What are venture capitalists?

  specialist investors (individuals or companies) who provide money for business purposes, often to new businesses
• What is crowd funding?

  where a large number of individuals (the crowd) invest in a business venture using an online platform and therefore avoiding using a bank