Internal

S/M/L
Definition or Advantages Disadvantages
Term
External
An overdraft occurs when money is
Overdraft
withdrawn from a bank account and the
available balance goes below zero.
E S Flexible, since only need to borrow
the amount that is needed,
Relatively high rate of interest.

A bank loan is when a bank offers to lend

money to consumers for a certain time Usually quick to arrange and A sole trader may
Bank Loan
period. As a condition of the bank loan, the
borrower will need to pay a certain amount
E M/L Large and varies the length of
time
have to use his/her
house as collateral.
of interest per month, or per year.

Debt factoring Immediate cash is made available. The Business does not receive 100 per cent
Debt is a way to fund your business by E business does not have the risk of of the value of its debt
Factoring
using the largest asset your business S collecting the debt.
has – your accounts receivable.
The term sale of assets refers to a
Sale of business selling some or all of its Makes better use of the capital tied Not available for new businesses
property. This is frequently done as F M up in the business.
Assets part of the sale or closing of a business
or a merger between two businesses.
A lease is a contract outlining the
Do not have to worry about maintenance Cost in the long term is normally more
terms under which one party agrees
Leasing to rent property owned by another E M/L of asset and asset can be replaced
regularly.
than the cost of buying the asset
party.

Money given by governments to support

business and encourage business Only valid for some particular area
These sources do not have to be repaid.
Grants development in areas where there is high E M
unemployment.

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Definition
External
Money that an individual has put
Owner’s away for non-immediate use. For
example, one may utilize personal
Savings
savings to save funds for an
expensive purchase
is an arrangement to buy goods
and/or services on account
Trade Credit without making immediate cash
or cheque payments.
Retained profit is the amount of a
Retained business's net income that is kept
within its accounts, rather than paid
Profit out to shareholders.
Hire a system by which one pays for a
thing in regular instalments while
Purchase having the use of it.
Used only by limited Liability companies
Share Issue where the business sells a % of itself to
investors in return for finance
a legal agreement by which a bank, building
society, etc. lends money at interest in
Mortgage exchange for taking title of the debtor's
property, with the condition that the
conveyance of title becomes void upon the
payment of the debt.
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Internal
S/M/L
or Advantages Disadvantages
Term
Available quickly and no Risk taken by owners is increased. This
I S source of financing is limited and may
interest needs not provide sufficient funds.
New Businesses might not be trusted
Easily available and no interest needs enough until they have proven they can
S to be paid. Can get discounts if money
owed is paid early
pay on time. This must be carefully
E managed to avoid overtrading and Cash
Flow problems
Reduces payments to owners, for
Does not have to be repaid unlike, for example dividends to shareholders. Small
S example, a loan. firms could find this is too low to finance
I the expansion needed. Not available for
new businesses.
Spreads the payment for an asset Not as flexible as leasing and all
E M over a longer period monthly payments must be paid
not have to be repaid. Dividends have to be paid
E L
If payments are not made, land
Usually available over a long time are property are lost and given
E L period as secured against property or to the Bank.
land.
 Internal
S/M/L
Definition or Advantages Disadvantages
Term
External
In corporate finance, a debenture is a
medium- to long-term debt Interest must be paid every year and
L Can raise very long-term finance the full amount paid back at the end
Debenture instrument used by large companies
E of the term.
to borrow money, at a fixed rate of
interest.

Microfinance is a category of
financial services targeting Good for people who cannot borrow Can only borrow small amounts
Micro-finance individuals and small businesses
E S from banks
who lack access to conventional
banking and related services
to gradually use up a supply of
Running something until it has all
Reduces opportunity cost
Must be done carefully to avoid
gone: run sth down We've I disappointing customers
down Stocks been running down our stock of the S
old model to make room for the new
one.
Small donations from lots of people Can raise money quickly from many Better for creative or environmentally
Crowdfunding (often over the internet) to help small E S different people friendly projects
businesses to start-up.

Copyright Harvey Taylor

https://www.tes.com/teaching-resources/shop/haltest