Long term sources of finance

• What can long-term sources be paid back over?

  A longer period of time
• What is a characteristic of loans as long-term sources?

  They can be paid back over a longer period
• What are loans also known as?

  Loan capital
• Why are bank loans considered quick and easy to take out?

  They have straightforward application processes
• How are loans typically repaid?

  With interest over time
• What happens if loans are not repaid?

  The bank can repossess the firm's assets
• How does the interest rate for loans compare to overdrafts?

  It is usually lower
• What is a consequence of paying back loans in monthly installments?

  It increases fixed costs
• What should a business check before taking out a loan?

  If they can still break-even
• What is a risk of using personal savings in a business?

  The owner could lose their money
• What is share capital?

  Money raised by selling shares
• What does buying shares in a business mean for individuals?

  They gain partial ownership
• How can a business use money gained from selling shares?

  To finance operations and expansion
• What is venture capital?

  Money raised through selling shares
• Who typically invests in venture capital?

  Individuals or businesses specializing in finance
• What is a risk associated with venture capital?

  The business may fail, losing the investment
• What is a potential benefit of venture capital for businesses?

  Access to additional funding for growth
• What is a common reason for businesses to seek venture capital?

  To expand operations and increase market share
• How does venture capital differ from traditional loans?

  Venture capital involves equity, not debt
• What is a key factor for businesses when considering venture capital?

  The potential for high returns on investment
• What is a disadvantage of using personal savings for business funding?

  Risk of losing personal money
• Why might a business owner choose to invest personal savings?

  To maintain control over the business
• What should a business consider when using personal savings?

  The impact on their personal finances
• What is the relationship between share capital and ownership?

  Share capital indicates ownership stake
• What is a potential risk of share capital?

  Loss of control for original owners
• How can share capital benefit a business?

  It provides funds without repayment obligations
• What is a common reason for businesses to issue shares?

  To raise capital for expansion
• What is a key consideration for businesses when issuing shares?

  The potential dilution of ownership
• What is the primary purpose of venture capital?

  To fund high-risk, high-reward businesses
• What is a potential downside of venture capital for business owners?

  Loss of some control over the business
• How does the involvement of venture capitalists affect business decisions?

  They may influence strategic direction
• What is a common characteristic of venture capital investments?

  They are typically high-risk investments
• What is the main goal of venture capitalists?

  To achieve high returns on investment
• What is a potential benefit of using venture capital for startups?

  Access to expertise and mentorship
• How can venture capitalists assist businesses beyond funding?

  By providing strategic guidance and networks
• What is a common reason for businesses to seek venture capital?

  To finance growth and innovation
• What is a key factor for venture capitalists when investing?

  The potential for significant returns
• What is a risk of relying solely on personal savings for business funding?

  It can jeopardize personal financial stability
• How does the use of personal savings impact business decisions?

  It may limit risk-taking opportunities
• What is a potential advantage of using share capital?

  It does not require repayment