BUSINESS FINANCE

By: Alanoud Obeidat

SOURCES OF FINANCE

Externa
Internal
l
Retained
Bank loans
profits

Sale of
Micro-
surplus
finance
assets

Selling
Debentures
inventories

Sale of Owner's
shares savings

Sell debts to
debt factor

Grants and
subsidies
PERIOD FINANCE IS REQUIRED FOR:

Overdrafts
from banks

Short term Debt factoring

Trade
creditors

Finance Leasing

Hire purchase

Long term Loans

Debentures

Sale of shares
WHICH SOURCE IS BETTER
TO CHOOSE AND WHY?

Choosing
sources of
finance

Risk and Control over

gearing the business

Status and Purpose and

Amount
size of period of
required
business time required
 ACTIVITY 21.8

• A)  Selling shares or bringing in another partner will make the original owner
lose control over his/her business because the business will be divided over
new people with different ways of handling a business and so on. Therefore,
getting loans from banks is a better choice since the owner will still have
control over the business and this will strengthen the trust between the bank
and the owner.
ACTIVITY 21.8 NEED FOR FINANCE MOST SUITABLE SOURCE REASON FOR CHOICE

Planned takeover of another business Bank loans Can have low interests and varying the
lengths of time

Temporary increase in inventories Retained profit No need to repay and no interests

over the summer

Purchase of new car for the Chief Owner's savings No interest and available
Executive

Research and development of new Selling of shares Helps the business gain people with
product-to come on the market in four experience to help them in the research
years' time and development

Cost of building modern factory Selling surplus assets Use of tied business capital and doesn't
requiring much less land than the increase debt of the busness 
present one