Sources of finance

• An internal source of finance is money that is available from within the business, for example, retained profits from last year
• Interest is the cost of borrowing or the reward for saving
• An asset is something owned by a business.

  Eg. Land, Buildings, Machienery etc.
• An external source of finance is money that is available from outside the business, for example, a loan from a bank
• Collateral is an asset that a bank holds as security for the repayment of a loan
• Factors influencing the choice of a source of finance:

  • The businesses profitability
  • Assets owned by a business
  • The amount of finance needed
  • Past history and future plans
  • The legal structure of the business
  • The amount of personal finance available
  • How risky the business is judged to be