Different Sources of Finance for Businesses

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Different Sources of Finance for Businesses

Introduction

This assignment will look at the different sources of finance that are

available to a small business or a big company. With each source of

finance listed the report will assess the implications that can arise

and along with this the report will look at the cost to the business

to taking a curtain source of finance.

All businesses need short-term finance from the very beginning to

start up the business and to cover day-to-day running costs. This

provides the business with working capital. However businesses also

need long-term capital to help them to grow and expand, and this is

paid back over a number of years. Without finance a business would

find it difficult to accomplish anything, for example someone who

decided to start up a shop would need finance at first to just buy the

shop and the stock. Even a window cleaner would need finance to buy

equipment such as ladders and buckets. But this can be taken onto a

larger scale, as all businesses need finance at some point.

Different sources of finance

The report will now list the different sources of finance available,

starting with sources available to small and new businesses to sources

only obtainable to big companies.

External Sources of Finance

This source of finance comes from outside the business and involves

the business owing money to an outside individual(s) or companies.

Personal Savings

This mainly applies to sole traders, partnerships and small private

companies. Owners may use some of their own money as capital to invest

in the business. Usually this option is used by the person(s) who will...

... middle of paper ...

...business plan

* Details of how much finance is needed and how it will be used

* The most recent trading figures of the company, a balance sheet, a

cash flow forecast and a profit forecast

* Details of the management team, with evidence of a wide range of

management skills

* Details of major shareholders

* Details of the company's current banking arrangements and any

other sources of finance

* Any sales literature or publicity material that the company has

issued.

A high percentage of requests for venture capital are rejected on an

initial screening. Thus only a small percentage of all requests

survive both this screening and further investigation and result in

actual investments. Recent successes in this area if financing include

the internet search engine 'Google'.

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