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    Sources of Finance (Business Ib)

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    Georgie Zafet
    Internal sources of finance come from within the business, such as owner savings. External sources come from outside, like bank loans. Short term finance is needed for under a year, like overdrafts or trade credit. Long term finance is for over a year, including loans, share capital, debentures, and crowdfunding.

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    Sources of Finance (Business Ib)

    Uploaded by

    Georgie Zafet
    69 views3 pages
    Internal sources of finance come from within the business, such as owner savings. External sources come from outside, like bank loans. Short term finance is needed for under a year, like overdrafts or trade credit. Long term finance is for over a year, including loans, share capital, debentures, and crowdfunding.

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    business ib

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    Sources of finance(business ib)

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    Internal sources of finance come from within the business, such as owner savings. External sources come from outside, like bank loans. Short term finance is needed for under a year, like overdrafts or trade credit. Long term finance is for over a year, including loans, share capital, debentures, and crowdfunding.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    69 views3 pages

    Sources of Finance (Business Ib)

    Uploaded by

    Georgie Zafet
    Internal sources of finance come from within the business, such as owner savings. External sources come from outside, like bank loans. Short term finance is needed for under a year, like overdrafts or trade credit. Long term finance is for over a year, including loans, share capital, debentures, and crowdfunding.

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    © All Rights Reserved
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    Internal sources of finance from within the business: This is a source of finance which exists

    within a business, such as savings belonging to the owner of the business.


    External sources of finance from outside the business: These are injections of funds into the
    business by individuals, other businesses or financial institutions. A bank loan is an example.
    Short term sources of finance are needed: for a limited period of time, normally less than
    one year
    Long term sources of finance are those that are needed over a longer period of time, usually
    over a year

    Internal sources of finance External sources of finance


    Short term sources of -Retained profits -Overdrafts
    finance -Reduction in Working -Trade credits
    Capitals -S/T loan
    -Debt factoring
    Long term sources of -Retained profits L/T loan capital
    finance -Sale of assets -Overloading
    -Microfinance
    -Business angels
    -Share capital
    -Debentures
    -Goods
    -Natural capital
    -Crowdfunding
    -Leasing
    -Venture Capital
    -Working capital is the
    amount of money that the
    company uses to cover day
    to day need

    Short term sources of finance(External)


     An overdraft permits an individual or a business to borrow money up to an agreed
    limit at any time
     Trade credit is a period of between 30 and 90 days given by suppliers before payment
    is due for goods and services
     Debt factoring takes place when banks or other organizations provide up to 80 per
    cent of the business’s debts immediately to provide an instant inflow of cash
    Long term sources of finance(External)
     Loan capital is money that is borrowed over a medium or long period of time.
    Examples of loan capital include bank loans and mortgages
     Crowdfunding is a source of finance that entails collecting relatively small amount of
    money from a large number of supporters(“the crowd”)
     Microfinance providers give financial services to poor or low-income clients
     A business angel is a person who has a large personal fortune end is willing to use
    some of this money to support risky ventures.
     Share capital is finance raised by a company from selling shares in its business to
    shareholders
     Leasing involves paying for assets(for example, vehicles over a period of time without
    owning the asset)
     Debentures are long term loans with fixed rates of interest. Land or property is often
    uses a security for this type of loan capital
     Mortgages are long term (up to 50 years) loans used to purchase land or property.
    The land or property is used as security by the lender against any failure to pay
     Collateral is a form of security required by banks and other financial organizations
    before agreeing a loan. The security is normally assets which can be sold to recoup
    the loan if it is not repaid
     Venture capital is funds (in the form of a mix of shares and loan capital) that are
    advanced in businesses which are thought to be relatively high-rise

    Internal sources of finance: The sources of finance within the business, such as the savings
    of the owner
    External sources of finance: The sources of finance given by individuals or organizations
    outside the business, such as loans

    Short term sources of finance are needed for up to a year


    Long term sources of finance are needed for more than a year

    Short term internal sources of finance:


    Retained profits
    Reduction in working capitals

    Long term internal sources of finance:


    Retained profits
    Sale of assets

    Short term external sources:


    -overdrafts(an individual or business to borrow money up to an agreed amount at any time
    -trade credits(a period between 30 and 90 days given by providers before payment is due for
    goods and or services
    -S/ T loan
    -Debt factoring(

    Long term internal sources


    -L / T loan capital
    -Overloading
    -Microfinance providers
    -Business angels
    -Share capital
    -Debentures
    -Goods
    -Natural capital
    -Crowdfunding
    -Leasing
    -Venture capital
    -Working capital

    Short term internal sources of finance


     Reduction in working capital
     Retained profits
    Short term external sources of finance
     Overdrafts(borrowing money up to a agreed amount at any time)
     Trade credits(a period between 30 and 90 days given by providers before payment is
    due for the goods or services
     S/T loans
     Debt factoring(when banks or other organizations provide up to 80 percent of the
    business’s debts immediately to provide an instant cash inflow
    Long term internal sources of finance
     Retained profits
     Sale of assets
    Long term external sources of finance
     Share capital (finance raised by a company from selling shares in its business to
    shareholders)
     Loan capital (money that is borrowed over a medium or long period of time.
    Examples of loan capital include bank loans and mortgages)
     Debentures (long-term loans with fixed rates of interest. Land or property is often
    used as security for this type of loan capital)
     Crowdfunding (a source of finance that entails collecting relatively small amounts of
    money from a large number of supporters (the ‘crowd’))

    Leasing involves
    paying for assets (for
    example, vehicles) over
    a period of time without
    ever owning the asset.

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