Marketing (Finance)

• Short-term finance


  Finance required for the day-to-day activities of the business, also called working capital, available for up to one year
• Long-term finance


  Finance available to the business for more than one year, usually used to purchase non-current assets, expand or take over another business
• Overdraft


  1. Bank allows a business to "overdraw" money, flexible source of finance as business can overdraw different amounts each month

  2. Must be paid back quickly with interest

  3. Interest rate is usually variable
• Trade credit


  1. Agreement with a supplier to delay payment for raw materials and components, works as an interest-free loan

  2. Supplier may refuse discounts if purchased in bulk

  3. Supplier may lose trust and refuse to work with the business in the future
• Leasing


  • Business hires an asset without purchasing it, maintenance and repair paid for by leasing company
  • Overall cost much more than if purchased outright
• Micro-finance


  Small loans of money to disadvantaged individuals to start their own business, usually in less economically developed countries, with social objectives like eliminating poverty
• Micro-finance


  • Amount of money available is usually small
  • Beneficiaries have to pay back the money with interest, which some consider immoral
• Crowd-funding


  Raising finance for a project or business venture through donations from a large number of people, usually via the internet
• Crowd-funding


  • Can raise large sums of money and does not have to be paid back
  • Each person does not need to give a large amount, so may be more willing to provide finance
  • Greater risk of fraud, which may undermine trust of donors for future genuine projects
• Overdraft


  A service whereby the bank allows a business to "overdraw" (take out more money than your account contains) money, so it is able to spend more money than it has on its bank account at a certain moment
• Trade credit


  An agreement that a business negotiates with a supplier to delay payment for raw materials and components – paying after three or six months instead of one month
• Long-term finance


  Finance available to the business for more than one year, usually used to purchase non-current assets such as machines and buildings, for expansion or for taking over another business
• External Sources Of Finance:

  • Bank loans – Businesses can raise finance by borrowing money from a bank; this is a common source of capital.
  • Issuing shares – Limited companies are able to raise finance by issuing new shares. Private limited companies can sell shares to existing shareholders and public limited companies can issue and sell new shares to the general public. Private limited companies can also change into public limited companies and raise large sums of money by selling shares to the general public. This is called an initial public offering (IPO). 
• Debentures – Limited companies can raise finance by selling debentures (long-term loan certificates). These loans do not give voting rights but ensure that interest is paid to the debenture buyers at the end of the loan period. 
• Overdraft – This is a service whereby the bank allows a business to “overdraw” (take out more money than your account contains) money, so it is able to spend more money than it has on its bank account at a certain moment. 
• • Trade credit – This is an agreement that a business negotiates with a supplier to delay payment for raw materials and components – paying after three or six months instead of one month.