Sources of Finance Flashcards

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Note: We may include questions that have multiple correct answers. It's useful to remember specific examples to understand these concepts better.

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What is a source of finance?

A way a business gets money to start, run, or grow.

Internal comes from inside the business, like profit. External comes from outside, like banks or investors.

Money the owner puts into the business. There is no interest, but the owner's money is at risk.

Profit kept in the business instead of paid out. No interest and no need to pay it back, but only if profit is made.

Selling equipment, vehicles, or buildings to raise cash. It can be quick but may reduce what the business can do.

Money borrowed from a bank. You pay it back with interest over time. The bank may ask for security, like property.

Permission to go below £0 in the bank up to a limit. Good for short-term cash gaps, but fees and interest can be high.

Buying from suppliers now and paying later, for example in 30 days. Helps cash flow, but late payment can add costs.

Money raised by selling shares in a limited company. You do not pay it back, but you share ownership and may pay out profits (dividends).

Raising small amounts of money from many people online. Backers may get rewards, interest, or shares.

Leasing means renting equipment. Hire purchase means buying it in small payments. It spreads the cost but can cost more overall.

Money given to a business for a specific purpose. You usually do not need to pay it back, but it has conditions and is hard to get.