Internal finance

• Reason for raising finance

  • To pay debts, this is likely to be a consolidation loan which may pay off suppliers
  • To help a business over a slow trading period - overdraft
  • To expand: a business may apply for long term finance such as a loan
  • To start-up a business may apply for a loan with a business plan or ask friends and family to invest
  • To buy stock: a business would ask a supplier for trade credit, typically 30, 60, 90 days
• Finance 


  The management of the investment needed to; open, run and grow a business
• • Owner's capital : personal savings - The stake the owner has in the business. Represents the net asset of the company. Can be the owners savings or redundancy pay. Typically used by sole trader and partnerships.
• • Retained profits : profit that they are able to reinvest into the business to help it grow.
• Retained profit - adv

  • there is no interest to pay
• Retained profits - disadvantage

  • once used it has gone and cannot be used elsewhere in the business. 
• • Sales of Assets : raise finance by spelling items that they already own e.g machinery, land, premises and vehicles.
• Sales of Assets - adv

  • reduce overhead cost
  • quick capital injection.
• Sales of Assets - disadvantage

  • no longer have the benefit of that asset
  • leasing can increase costs in long run,
  • money raised may be limited