Internal finance

• Where does Internal finance come from

  Owner‘s capital

  Retained profit

  sale of assets
• Benefits of internal finance?

  Often free - does not involve payment or interest

  Can usually be organised very quickly and without paperwork

  Businesses that fail credit checks - can access internal finance sources more easily
• Drawbacks of internal finance

  Significant opportunity cost involved in the use of internal finance - e.g once retained profit has been used it can’t be used for other purposes

  may not be sufficient to meet business needs

  internal finance method is rarely as tax efficient as external methods