Sources of Finance

Sources of Finance

1. Time periods for finance

   • short term; 1-3 years
   • medium term; 3-10 years
   • long terms ; 10 or more years

2. Internal sources of finance

   • Divestment - selling off a part of the business
   • Personal savings - savings collected previously
   • Reduction in current assests - eg reducing the amount of stock or reducing amount kept in the bank

3. External sources of finance

   • Short term
     • * trade credit - getting things in advance to paying for them
     • *overdrafts - owing money to the bank
     • loan
   • Medium term
     • Leasing -renting something for a monthly fee
     • hire purchase - paying monthly for something and then owning it at the end eg a phone contract
     • loan
   • Long term
     • loan
     • crowdfunding - getting investors from the general public
     • morgages
     • share capital - inviting people to buy shares
     • venture capital - asking specific investors / organisations to buy shares

4. Sale of fixed assests means ....

   • selling something of value(e.g car or building). Fixed assets means its an item usually kept for a long time.

5. Retained profit means ...

   • money made and then kept

6. Factoring means ...

   • Selling off a debt to a company. The company will pay out to the person who is owed and then will go and attempt to get as much from the person in debt.

7. Sale and lease back means...

   • Selling off an asset for money and then paying monthly to use the asset from the company. This means the business can have money instantly and use of the asset.