External finance

• Friends and family - advantages

  • Will probably be offered without the need for security and at lower rates and over longer terms than traditional lenders
• Friends and family - disadvantage

  • It may cause tension and problem if the finance is not repaid or the business does not flourish
  • They may also demand their money back at short notice
• Banks - advantages

  • Lend with asking for a % of the ownership
  • Banks will allow the business owners to continue running the business their own way and not interfere so the owner retains control of the business
• Banks - disadvantage

  • Bank loans can be expensive compared to other sources of finance and interest must be paid back on time
  • It may be hard for a new business owners to obtain a loan as they have no historical sales data to show the bank
• Peer to peer funding - advantages

  • Businesses can get access to funding within a week once approved
  • Business owners can apply online
  • Investors can expect returns of 6-7% whereas savings account might only give them 3%
• Peer to peer funding - disadvantage

  • Loans are classified as private business loans so the money for the loan comes from several investors or small business
  • If there are not enough individuals Interested or willing to invest in your loan you may not be to acquire the entire amount that the business needs
• Business angels - advantages

  • Angels are free to make investment decision quickly
  • The owners will have no repayment or interest on the money lent
  • The owner get access to your investor's sector knowledge and contracts
  • The owner get access to angels mentoring or management skills
• Business angels - disadvantage

  • Not suitable for investments below £10000 or more than £500000
  • Owners needs to give up a share of the business
• Peer to peer funding 


  Financial technology that allows people to lend or borrow money from one another without going through a bank.