Finance and source of finance

• What are the short-term sources of finance mentioned?

  • Overdraft
  • Trade Credit
• What are the long-term sources of finance mentioned?

  • Personal savings
  • Venture capital
  • Share capital
  • Loans
  • Retained profit
  • Crowd funding
• What is an overdraft?

  Using money not in the account, with high interest
• What are two advantages of using an overdraft?

  Immediate access to funds, no paperwork
• What are two disadvantages of using an overdraft?

  High interest rates, repayment on short notice
• What is trade credit?

  Credit agreement to pay suppliers later
• What are two advantages of trade credit?

  Pay later, easier access to materials
• What are two disadvantages of trade credit?

  Must pay eventually, requires supplier agreement
• What are personal savings?

  Money saved by an entrepreneur without interest
• What are two advantages of using personal savings?

  No interest charges, reliable source of funds
• What are two disadvantages of using personal savings?

  Risk of losing personal funds, no fallback money
• What is venture capital?

  Investment in exchange for profit share
• What are two advantages of venture capital?

  Access to funds and mentorship, increased status
• What are two disadvantages of venture capital?

  Sharing profits, loss of ownership control
• What is share capital?

  Money raised by selling shares to investors
• What are two advantages of share capital?

  No repayment obligation, no interest charges
• What are two disadvantages of share capital?

  Dilutes control, vulnerable to takeovers
• What are loans?

  Money borrowed from banks with interest
• What are two advantages of loans?

  Large amounts available, fixed interest rates
• What are two disadvantages of loans?

  Repayment required, interest added
• What is retained profit?

  Profit reinvested in the business
• What are two advantages of retained profit?

  No interest charges, owned by the business
• What are two disadvantages of retained profit?

  May be insufficient, limited to one purpose
• What is crowd funding?

  Funding from many investors for a project
• What are two advantages of crowd funding?

  Supports community, raises project profile
• What are two disadvantages of crowd funding?

  No guaranteed amount, funds returned if insufficient
• What is the benefit of using a capital loan?

  Choose the amount needed for a problem
• What is a potential risk of using an overdraft?

  High interest rates may lead to bankruptcy
• What is one short-term source of finance Lucy could use?

  Overdraft
• What should a 9 mark answer include when justifying a finance option?

  1. Choose one option
  2. State an advantage with explanation
  3. State a disadvantage with explanation
  4. Write a conclusion
• What are the two options Lucy is considering for financing her business expansion?

  Retained profit and crowd funding
• What is the link to the forms quiz plenary?

  https://forms.office.com/Pages/ResponsePage.aspx?id=WU3e8f_wDkC-tNWhPgCzXoXccK2A-q9Ch1pT3UWIx39UMjBVR1NHT0M1MlA4TENGU01JTlNFS1NVNC4u