business - finance

• the types of finance are:

  • bank loan
  • bank overdraft
  • government grant
  • owners savings
  • venture capital
• short term finance:

  • bank overdraft
  • trade credit
  • government grant
  • retained profits
  • factoring
• bank overdraft


  allows a business to take more money out of their account than there is available and are arranged with the bank
• trade credit


  business can arrange with suppliers where they can purchase goods and pay for them at a later date
• government grant


  money given to the business from the government that does not need to be paid back
• retained profits


  when a business saves some of its money that is made to reinvest into the company
• factoring


  business sell their debts to a "factor" for a reduced amount so that the factor will take the responsibility of collecting the amount owed from the customer
• medium term finance:

  • bank loan
  • leasing
  • hire purchase
• bank loan


  money given to the business from the bank that needs to be paid back over an agreed period of time. Repayments must be paid monthly in instalments with interest.
• leasing


  (another name for renting) businesses can rent equipment and vehicles instead of having to find the money to buy them
• hire purchase


  the cost of the item + interest is split into equal instalments paid over an agreed period of time and at the end the item is owned by the business
• long term finance:

  • owners savings
  • mortgage
  • share issue
  • venture capital
• owners savings


  money invested into the business from the owners personal savings
• mortgage


  used to purchase property. Interest is added to the amount loaned at the beginning and the whole amount is repaid in equal monthly instalments over a long period of time.
• share issue


  selling shares in the business to raise more money
• venture capital


  venture capitalists can provide finance when banks may decide a loan is too risky but they will usually want a stake in return