Sources of Finance
Putting your own money into a business
• Make all the decisions
• Complete control
• Keep all of the profit
• Unlimited liability
• Might not have the expertise on what need to be done like the financial expertise
Friend and family
Low or no interest - as they might not ask for money back
won’t want the money until established
if the business goes bust you might lose your friends
take enough out for you to live on and the rest back into the business
a disadvantage will be you won’t have enough to give for yourself.
An advantage is getting equipment and expanding without interest.
External sources of finance
you are likely to go to the bank first of all
a loan or over draft
start-up costs (you will get a loan)
Running Cost (you will get an over draft)
Loans can help with the start-up cost. It can also be used once the business is underway to help finance a large purchase.
However, there are many types of loans available and it is important to hop around to find the best one.
Factors that we need to look out for.
The APR (annual percentage rate) – this tells you the rate of interest you will be charged.
The total amount will have to pay back- this could be doubled or tripled the amount you are borrowing.
The amount of time the loan is spread over- generally the longer the time you have the loan, the more it will cost.