sources of finance

• Short-term finance


  Money borrowed for one year or less
• Long-term finance


  Money borrowed for more than one year
• Capital finance


  Finance provided by the owners of a business
• Most entrepreneurs risk their own money when starting a business. However, the money is rarely enough. They need to find finance from other sources. Also, businesses often struggle to find start-up capital and may start trading with insufficient funds
• Short-term needs


  Money needed to fund day-to-day expenditure, usually repaid within one year
• Long-term needs


  Money needed for resources that will be used repeatedly by the business for long periods of time, often borrowed from financial institutions and repaid over a longer period
• Start-up capital


  Funds needed when first setting up a business to buy resources before trading can begin
• Internal finance


  Finance generated by the business from its own means
• Retained profit


  Profit held by a business rather than returning it to the owners and which may be used in the future
• Assets


  Resources used or owned by a business, such as cash, stock, machinery, tools and equipment
• External finance


  Finance obtained from outside the business
• Bank overdraft


  An agreement with a bank where a business can spend more money than it has in its account up to an agreed limit
• Trade payables


  Buying goods from suppliers, such as materials and components, and paying for them at a later date
• Mortgage


  A long-term loan where the borrower must use land or property as security
• Repossess


  To take back cars, furniture or property from people who had arranged to pay for them over a long time, but can no longer continue to pay for them
• Debenture


  A long-term loan where the lender is a creditor of the company, not an owner, and must be repaid on a set date
• Hire purchase (HP)


  Buying specific goods where the buyer makes a down payment and then pays the remaining fee in monthly instalments, with the goods not legally belonging to the buyer until the last instalment is paid
• Rights issue


  A sale of new shares to existing shareholders at a discount
• Venture capitalists


  Specialist investors (individuals or companies) who provide money for business purposes, often to new businesses
• Crowd funding


  Where a large number of individuals (the crowd) invest in a business venture using an online platform and therefore avoiding using a bank