Flashcards
Sources of Finance for Startups
Flashcards do conjunto (14)
- 1Name 4 internal sources of finance1. Personal sources
2. Retained profits
3. Share capital invested by the entrepreneur
4. Sale of assets - 2What are 3 advantages of using personal sources?1. Owner remains in control
2. Flexible and the lowest cost
3. Builds personal commitment to the startup - 3What are 3 disadvantages of using personal sources?1. Opportunity cost
2. Entrepreneur's personal funds at risk
3. May be limited - 4Name 5 external sources of finance1. Share capital from outside investors
2. Friends and family
3. Bank loan
4. Bank overdraft
5. Grants and other government incentives - 5What are 3 advantages of using retained profits?1. Cheap and highly flexible
2. No loss of business control
3. Potentially large if profits are strong - 6What are 2 disadvantages of using retained profits?1. External shareholders may want a dividend
2. Startups struggle to reach profitability - 7What are 2 advantages of a bank overdraft?1. Flexible short-term source of finance
2. Only used when needed - 8What are 2 disadvantages of using a bank overdraft?1. Expensive - high rate of interest
2. Repayable to bank on demand - 9What are 2 advantages of using a bank loan?1. Longer-term finance and more secure
2. No effect on ownership - 10What are 3 disadvantages of using a bank loan?1. Hard for a startup to obtain (Banks don't like risks)
2. Interest payable on entire amount
3. Bank may require security (collateral) - 11What are 2 advantages of using a business angel?1. Potentially significant source of external finance
2. Angel's expertise and contacts can benefit a business - 12What are 2 disadvantages of using a business angel?1. Loss of control
2. Longer and more complex finance raising process - 13What are 2 advantages of using friends and family as a source of finance?1. Flexible and potentially significant
2. Doesn't have to mean a loss of control (e.g. loan) - 14What are 2 disadvantages of using friends and family as a source of finance?1. Potential for personal tensions & disputes
2. May want some control or influence over decisions
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- Descrição
- A Levels Business Studies (AQA AS BUSS1) FlashCards sobre Sources of Finance for Startups, criado por lj.willis em 07-04-2014.
- Criado por
- lj.willis
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