2.1 Raising finance Flashcards

• Internal Finance

  Funds used within a business to fund expansion or growth e.g. retained profits and sale of assets

  
• Owner's Capital

  When an entrepreneur invests their own money in a business e.g. from personal savings
• Retained Profit


  Profit kept within the business from profit after tax to help finance future activity
• Sale of Assets

  A method of raising short term finance by disposing of business assets in return for cash
• External Finance


  The ability to raise funds from sources outside of the business : Bank loans, overdrafts, Venture capitalists, Crowd funding, Share capital, Business angels
• Peer-to-peer Funding


  The practise of an individual lending to other individuals (peers) with whom there is no relationship or contact
• Business Angels

  Wealthy individuals making personal investments into start-up businesses in return for a share of the business i.e. percentage equity
• Crowd Funding


  This is when a business venture is funded by raising small amounts of money from lots of people e.g. through the internet
• Loans


  When a lender provides capital (money) to a borrower and the borrower agrees to repay the borrowed money, with interest, over a period of time

  
• Share Capital


  Money raised from the sale of shares which is used to fund the future activities of a business
• Venture Capital

  Investment from an established business person or business into a new business in return for a percentage equity in the new business
• Overdrafts


  The pre-agreed facility to overspend on a current account, up to an agreed sum
• Leasing


  A contract that allows the renting of assets from another party e.g. lease premises, equipment, land etc.
• Grants


  Fixed amounts of capital provided to a business by the government or other organisations to fund specific projects
• Trade Credit


  An arrangement by a business to provide goods and services on account e.g. 30 days
• Liability


  The extent to which an investor is legally responsible for the debts of a business
• Limited Liability


  The investor is only responsible for the debt up to the amount they have invested or promised to invest
• Unlimited Liability


  The investor is responsible for all of the debts of the business and therefore at risk of losing their own personal possessions
• Shareholders


  Investors who are part owners of a company and receive a dividend, which is a share of the profit, in return for their investment

  
• Dividends

  A percentage of profit paid to shareholders as a reward for their investment

  
• Business Plan

  A document that describes how an entrepreneur proposes to set up a new business;(finance, marketing, HR and Operations) in order to receive external finance

  
• Cash-flow Forecast


  The movement of cash in and out of business over a period of time

  
• Opening balance

  The amount of money in a business at the start of the month
• Net Cash Flow

  Total inflows - total outflows
• Closing balance


  Opening balance + net cash flow