sources of finance
Legal structure of the business
Different businesses depending on their legal structure are able to obtain different sources of finance easier than others. For example a larger company may be able to obtain a loan easier than a smaller business. I will now go on and look at the different legal ownerships are and talk about their financing.
Sole traders
A sole trader is usually owned and controlled by one person. Small businesses such as sole traders are usually financed by the owner’s own personal money otherwise, known as capital or money borrowed from friends and family. The owner is usually able to get an overdraft.
Partnerships
A partnership is a business owned and run by up to 20 people. It offers the business a greater choice of finance, as each partner will contribute to capital to the business. This instantly makes more funds available than that of a sole trader. If the business would like to expand then they can simply ask another person to join the partnership. A general partnership will have limited liability, which is the same as a sole trader. Therefore, any external borrowing will be set against fixed assets owned by the business. If one partner gets the business into debt, all partners are liable for it. Partnerships are also able to use credit facilities offered by their suppliers.
As a partnership have access to a larger capital than a sole trader, they are more likely to be able to secure a larger bank loan, greater hire purchase or extended credit agreements.
Private limited Companies (LTD)
Public Limited Companies (PLC)
Public limited are usually the largest form of private ownership. They able to sell their shares to the general public through the stock exchange. The ability to sell these shares to the general public means
My business is a PLC so it is able to have access to all sources of finance shown above. I will now go onto look at all of the sources of finance available to businesses and I will highlight the sources
Different businesses depending on their legal structure are able to obtain different sources of finance easier than others. For example a larger company may be able to obtain a loan easier than a smaller business. I will now go on and look at the different legal ownerships are and talk about their financing.
Sole traders
A sole trader is usually owned and controlled by one person. Small businesses such as sole traders are usually financed by the owner’s own personal money otherwise, known as capital or money borrowed from friends and family. The owner is usually able to get an overdraft.
Partnerships
A partnership is a business owned and run by up to 20 people. It offers the business a greater choice of finance, as each partner will contribute to capital to the business. This instantly makes more funds available than that of a sole trader. If the business would like to expand then they can simply ask another person to join the partnership. A general partnership will have limited liability, which is the same as a sole trader. Therefore, any external borrowing will be set against fixed assets owned by the business. If one partner gets the business into debt, all partners are liable for it. Partnerships are also able to use credit facilities offered by their suppliers.
As a partnership have access to a larger capital than a sole trader, they are more likely to be able to secure a larger bank loan, greater hire purchase or extended credit agreements.
Private limited Companies (LTD)
Public Limited Companies (PLC)
Public limited are usually the largest form of private ownership. They able to sell their shares to the general public through the stock exchange. The ability to sell these shares to the general public means
My business is a PLC so it is able to have access to all sources of finance shown above. I will now go onto look at all of the sources of finance available to businesses and I will highlight the sources