Sources of finance

• Retained profit

  When a business uses historical profits from previous years to invest
• Disadvantages of retained profits

  • May create conflict if there were shareholders
  • Usually a limited amount of retained profit, slows the growth
• Advantages of retained profits

  • No financial cost
  • No interest
  • No control/share/power given up
• Disadvantages of crowdfunding


  • If profits are made, they'll need to be shared
  • Loss of share of business
  • If project fails, business loses reputation
  • Investors might have very limited money to contribute
• Advantages of crowdfunding


  • No repayments
  • No interest
  • Excellent way to advertise the business
  • Lot of people willing to give feedback to help improve
• Personal savings


  When an entrepreneur uses personal finances such as cash in bank accounts to finance the business
• Disadvantages of personal savings

  • Likely to be limited
  • If business does not initially make profit, financial pressure and loss of well-being
• Advantages of personal savings


  • No financial cost
  • No interest
  • Easiest and quickest type of finance
  • It's your own money
• Venture capital


  A source of finance normally for small businesses with good growth prospects, money invested by an individual or group that is willing to take the risk of funding a new business in exchange for an agreed share of profits
• Disadvantages of venture capital

  • You give up a share of your business profits
  • May lose control/power over the business if more than 50% of share given up
  • Lose decision making power
• Advantages of venture capital

  • Because there's a high risk, banks would not be interested and so venture capital makes expansion possible
  • No repayment
  • Venture capitalist has taken the risk, so entrepreneur is less worried
• What is overdraft

  When a bank allows a firm to take out more money than it has in its bank account
• Disadvantages of overdraf

  • Higher interest rates
  • Affect negatively your credit score
• What is trade credit?

  Businesses receive 1 or 2 months to pay for their purchase
• Disadvantages of trade credit

  • Could end up with a large fee if payment is too late
• Advantages of trade credit

  • Allows small businesses to earn enough money
• What are loans?

  A loan from the bank or family and friends
• Disadvantages of loans

  • Also paid with interest
  • Have to pay monthly
• Advantages of loans

  • Lower interest than overdraft
  • Quick and easy
• What is finance?

  Refers to sources of money for a business
• Advantages of overdraft:

  • U can borrow more money than u have in ur bank account
  • Lenders may be flexible when paying back
• What is crowdfunding?

  Raising finance from a large number of people who each contribute w money for the start up of a business