Worksheet: Short & Long-Term Sources of Finance

1) What is meant by the term long-term finance?

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SHORT-TERM FINANCE

EXTERNAL SOURCES DESCRIPTION ADVANTAGES OF THIS DISADVANTAGES OF

OF FINANCE SOURCE THIS SOURCE

Overdrafts  Cheaper than 

taking a bank loan


A business does not  

immediately pay for
the goods it purchases,
it may be given 30, 60
or 90 days to pay.  

Debt Factoring   The firm might not

receive 100% of the
debt.


 LONG-TERM FINANCE
EXTERNAL SOURCES DESCRIPTION ADVANTAGES OF THIS DISADVANTAGES OF
OF FINANCE SOURCE THIS SOURCE

Able to own an asset   Firm is

once all the monthly responsible for
instalments have been maintenance
made. 

Leasing  Lower initial 

capital requirement



Invests in smaller, risky  Often offer
ventures & loans management
money in return for a advice &
share of business consultancy as part
ownership. of the loan 


Bank Loan  

 
 Long-term loan to a  
limited company with
fixed interest rates &
repayable over a
specified time period 
(15-25 years)

Grants  Cheap and free 

source of funds

The business sells an  

asset and then leases it
back from its new
owner.

 