Sources 1
Funds from outside of the organization, e.g. through debt (overdrafts, loans and debentures) share capital or the government.
What are external sources of finance?
Spending on the day to day running of the business. Such as rent, wages and utility bills.
What is revenue expenditure?
Government financial gift to support business activities. They are not excepcted to be repaid.
What is a grant?
Government funds that will lower a firms production costs as output provides benefits to society. An example would be farmers provided financial support to help stablize food prices.
What are subsidies?
Investing on fixed assets such as the purchase of land and buildings.
What is capital expenditure?
Allows a business to spend in excess of the amount in its bank account. A flexible form of short term borrowing.
What is an overdraft?
Refers to a business converting its legal status to a public limited company by floating (selling) its shares on a stock exchange for the first time.
What is an initial public offering (IPO)?
Involves a business selling a fixed asset (to raise finance) and immedietely leasing the property back. The business transfers wonership although the asset does not physically leave the business.
What is sale-and-leaseback?
Getting funds from within the organization, e.g. through personal funds, retatined profits and the sale of assets.
What are internal sources of finance?
The money raised from selling shares in a limited liability company. From its initial public offering (IPO) and any subsequent share issue.
What is share capital?
An medium term external source of finance where a contract is agreed upon between a company and a customer. The customer pays rent to hire assets from the company, who is the legal owner of the asset.
What is leasing?
Long term loans issues by a business. The buyers of the certificates (individuals, governments, customers etc.) recieve interest payments even if the business makes a loss and before shareholders are paid dividends.
What are debentures?
Allows a business to 'buy now and pay later'. The credit provider does not recieve cash from the buyer until a later date (usually between 30-60 says).
What is trade credit?
Wealthy entrepreneurs who risk their own money by investing in small to medium size businesses. These businesses generally have high growth potential.
What are business angels?
Medium to long term sources of interest bearing finance obtained from commercial lenders. Examples include mortgages.
What is loan captial?
Internal finance from sales of items the business owns. This may include old machinery, computer equipments, land etc.
What are sales of assets?
High risk capital usually invested by firms at the start of a business idea. The finance is usually in the form of loans and/or shares in the business.
What is venture capital?
A financial service where a third party collects debt on behalf of other businesses, in return for a fee.
What is debt factoring?
The value of surplus that a business keeps to use within the business after paying corporate taxes to the government and dividends to shareholders.
What is retained profit?
Short term, medium term and long term finance time periods, respectively.
Up to 12 months, 1-5 years and over 5 years.