2.1.2 External Finance

• External finance

  External financeis sourced from outside of the business
• business plan

  
• Sources of External Finance

  
• Family and friends


  Small business owners approach close acquaintances to invest in or lend money to a business
• The Advantages of Family and Friends as a Source of Finance

  
• Disadvantages of Family and Friends as a Source of Finance

  
• Banks


  Banks provide several different kinds of loans to businesses e.g. a small business loan
• The Advantages of Bank Loans

  
• Disadvantages of Bank Loans

  
• Peer-to-peer funding


  Individuals with available savingspool it with others in a peer investment schemesuch as Funding Circle
• The Advantages of Peer to Peer Funding

  
• Disadvantages of Peer to Peer Funding

  
• Business angels


  Some individuals specialisein making investmentsin start-up or expanding businesses e.g. Dragons Den investors
• The Advantages of Business Angels

  
• Disadvantages of Business Angels

  
• Crowdfunding


  Crowdfunding allows businesses to access finance provided by a large number of small investors on online platforms such asKickstarter
• The Advantages of Crowdfunding

  
• Disadvantages of Crowdfunding

  
• Credit rating

  
• Joint venture

  
• Other businesses

  
• The Advantages of Finance from Other Businesses

  
• Disadvantages of Finance from Other Businesses

  
• Methods of Finance

  
• Non-current liabilities

  
• Capital equipment

  
• Annual general meeting

  
• Methods of Finance: loans

  
• Methods of Finance: overdrafts

  
• Methods of Finance: share capital

  
• Methods of Finance: venture capital

  
• Methods of Finance: leasing

  
• Methods of Finance: trade credits

  
• Methods of Finance: grants