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Finance

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Revision Method

Sources of Finance

Revision Notes

Key Points

  • Internal: retained profit, sale of assets, owner capital
  • External: loans, overdraft, shares, debentures, trade credit
  • Loans: regular repayments with interest, secured
  • Shares: no repayment, dilutes control, Ltd/PLC only
  • Choose based on amount, time, cost, control, repayment ability

INTERNAL SOURCES (from within business): Retained profit (profit kept in business not paid as dividends - no interest, no control loss, limited amount). Sale of assets (sell equipment/property - quick cash, lose the asset). Owner capital (owner invests own money - no interest, limited by owner wealth). EXTERNAL SOURCES (from outside): Bank loan (fixed amount borrowed, regular repayments with interest, secured against asset). Overdraft (borrow up to limit when account negative, flexible, high interest, repay on demand). Share capital (sell shares for investment - no repayment needed, dilutes control, only for Ltd/PLC). Debentures (long-term loan, fixed interest, must repay). Trade credit (buy now pay later from suppliers, improves cash flow, may lose discounts). Grants (government/EU money, don't repay, competitive to get). Venture capital (investors fund high-risk startups, large amounts, take ownership share). Crowdfunding (many small investors online, modern method, no control loss). Choose based on: amount needed, time needed, cost of finance, control impact, ability to repay.