Business

• Internal sources of finance


  Generated from within the business
• Internal sources of finance


  • Personal savings/owner's capital
  • Retained profit/reserves
  • Sale of assets
• Personal savings/owner's capital


  • Retain all control over the business
  • Limited by the amount of personal savings available
• Retained profit/reserves


  • Don't have to pay interest
  • Shareholders may expect dividends instead of reinvestment
• Sale of assets


  • Quick way to turn fixed assets into cash
  • Lose the asset and ability to use it for production
• External sources of finance


  Obtained from outside the business
• External sources of finance


  • Family and friends loans
  • Bank loans
  • Bank overdrafts
  • Peer-to-peer funding
  • Leasing
  • Trade credit
  • Business angels/venture capital
  • Crowdfunding
  • Government grants
  • Issuing shares
• Family and friends loans

  • More personal connection, less assurances required
  • Potential to damage personal relationships if unable to repay
• Bank loans


  • Don't dilute ownership, but may require collateral
  • Have to pay interest
• Bank overdrafts


  • Flexible, only pay interest on amount borrowed
  • Higher interest rates than loans
• Peer-to-peer funding


  • Potentially better deals, but less security and regulation
• Leasing


  • Helps manage cash flow, but don't own the asset
  • May end up paying more than buying outright
• Trade credit


  • Boosts working capital, but suppliers also want prompt payment
• Business angels/venture capital


  • Bring expertise, willing to take more risk
  • Require large equity stake in business
• Crowdfunding


  • No collateral or rigid agreement, but challenging to persuade people to contribute
• Government grants


  • No repayment required, but difficult to access
• Issuing shares


  • No repayment or interest, but dilute control and may require dividend payments