Business essentially need finance for the short-term and the long-term.
There are a number of ways of raising finance for a business. The type of finance chosen depends on the nature of the business. Large organisations are able to use a wider variety of finance sources than are smaller ones. Savings are an obvious way of putting money into a business. A small business can also borrow from families and friends. In contrast, companies raise finance by issuing shares. Large companies often have thousands of different shareholders.
The sources of finance;
The money needed to start a business is called business finance. This resource will look at some of the possibilities. This factor can be defined as long term and short term factors. We need to remember that some sources of finance will be appropriate for some businesses but not for others.
There are a number of factors to think about when looking at this area of business. We will be looking at the following:
• Short term sources of finance:
o Bank overdraft
o Trade Credit
o Invoice discounting
o Bank loans
o Credit cards
• Long term sources of finance:
o Bank loans
o Share issue
o Preference share.
o Convertible debentures
o Leasing and higher purchase
o Asset sales
o Venture capital
o Retained profit
o Owners' capital
o Government, local authority or EU grants
There are also two more different types of finance, they are
Internal and External Finance
Internal finance comes from the trading of the business.
External finance comes from individuals or organisations that do not trade directly with the business e.g. banks.
Description of short term finance
Short term sources is needed to cover the day to day running of the business. It will be paid back in a short period of time, so less risky... [continues]
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