A4 Business

• Finance


  Money or capital are also used. Finance is the amount of money in the business from various sources.
• Internal sources


  Money and finance generated from within the operations of the business itself
• External sources


  Money and finance raised from outside the business and its direct operations
• External sources


  • Owners capital
  • Loans
  • Crowd funding
  • Mortgages
  • Venture capital
  • Debt factoring
  • Hire purchase
  • Leasing
  • Trade credit
  • Grants
  • Donations
  • Peer to peer lending
  • Invoice discounting
• Owners capital


  Money from the owner/savings
• Owners capital


  • No interest charged
  • Available immediately
  • No loss of ownership
• Owners capital


  • Limited amount
  • Multiple owners may not all be able to invest the same amount
• Loans


  Money from a bank/financial institution
• Loans


  • Pay in instalments
  • No loss of ownership
• Loans


  • Interest charged
  • Interest can change (variable)
  • Has to be paid regardless
• Crowd funding


  Attracting investment from a large number of people with small individual amounts
• Crowd funding


  • Can raise large amounts of money
  • No interest paid
• Crowd funding


  • Some loss of control
  • No guarantee enough will be raised
• Mortgages


  Long term loan for a property purchase
• Mortgages


  • Large amount can be obtained
  • No ownership loss
• Mortgages


  • Interest charged
  • Secured against asset
• Venture capital


  Investment from an experience entrepreneur like Dragons Den
• Venture capital


  • Finance offered by expert
  • Can offer support and money
• Venture capital


  • Some loss of ownership and control/decision making
• Debt factoring


  Selling on businesses debts to a debt collection company
• Debt factoring


  • Speeds up cash inflows
  • Factoring company take on the risk
• Debt factoring


  • Only receive a percentage of what is owed
• Hire purchase


  Paying to use an asset in monthly instalments, paying off at the end
• Hire purchase


  • Avoids need to pay lump sum
  • Pay in instalments
• Hire purchase


  • Overall amount often much more than the price of asset
• Leasing


  Renting equipment/assets on a monthly basis
• Leasing


  • Not responsible for upkeep of asset & spreads cost
• Leasing


  • Never actually own asset, and total cost will be higher
• Trade credit


  A period of 30 days to pay off your bill to suppliers
• Trade credit


  • Keeps money in the business for longer
• Trade credit


  • Only short term and linked to stock purchases
• Grants


  Lump sum money offered by government or other charitable organisations
• Grants


  • No interest or need to repay
• Grants


  • Difficult to find/qualify for/lengthy to apply for
• Donations


  Voluntary money given by charities or social entrepreneurs
• Donations


  • No repayment/interest/loss of ownership
• Donations


  • Likely only to be small/less likely to get
• Peer to peer lending


  One business person lending to another in return for interest payments
• Peer to peer lending


  • Interest can be low and fixed up front
• Peer to peer lending


  • Amounts may be limited and for short term only