Sources of finance

• Factors that influence a banks decision to lend

  • What’s being sold
  • current financial situation
  • past trading record
• What are external sources of finance

  • Loans
  • mortgage
  • overdraft
• Advantages of a loan

  • Quick and easy to set up
  • large and small amounts of money can be borrowed
• Disadvantages of loan

  • Risk of bankruptCy if not paid back
• What’s a mortgage 


  Method of borrowing To purchase a property
• Advantage of a morgage

  Become an owner of a property without paying it all uptront
• Disadvantage of a mortgage

  Monthly paymentd
• What is an overdraft

  Borrowing from a bak by drawing more money from their bank account
• Advantages of an overdraft

  • Can borrow what you need
  • quick and easy to arrange
• Disadvantages of an overdraft

  • higher interest rates
  • expensive
  • have to pay back
• What are internal sources of finance

  • Owners capital
  • retained profit
• What is owners capital

  The owners own personal money that they may have saved
• What is retained profit

  Profit that is kept and retained within the business that hasn’t been shared with shareholders or owners