1. Raising Finance
What you need to know!

2. Raising finance internally (sole trader)
Owner’s money e.g. redundancy money or savings
Sale of personal assets
Reinvesting profits from business
Use profits which have been invested in a bank deposit account

3. Raising finance internally (companies) 1
Sale of more shares
rights issue – offer more shares to existing shareholders
Ordinary shares give a share in the profits
preference shares give a fixed dividend regardless of level of profits

4. Raising finance internally (companies) 2
Retained profits
Sale of assets
Sale and leaseback – sell a building and then lease it back from the Finance House

5. Raising finance externally – small companies
Loan from friends or family
Training and Enterprise Council (to help unemployed people who want to set up in business)
Development Agency (to help certain areas which need help)
Small Firms Loans Guarantee Scheme (specific to new small companies – gives security to get a bank loan)

6. Raising finance externally – small companies 2
Hire Purchase – goods belong to loans company until debt paid off
Leasing – get goods for fixed period of time – can then get new or buy at reduced price
Contract Hire – rental paid for fixed period of time – used for vehicles and plant and equipment

7. Raising finance externally – larger companies
Private limited company can become a public limited company
Financial institutions (e.g. banks) may give mortgages or loans
Venture capitalists may invest (willing to take a risk for a possible profit)
Loans from government (European, central or local)

8. Raising finance externally – larger companies 2
Venture capitalists may invest (willing to take a risk for a possible profit)
Loans from government (European, central or local)

9. Raising finance externally – very large companies
Foreign bank loans – interest may be lower than with British institutions
Unsecured bank loans –banks are prepared to risk loans with very large companies
Debentures – long term loan with a fixed rate of interest and a fixed repayment date

10. How to choose where to get the money?
Costs of raising money
Length of time of deal
What the money will be used for
Current trading position of business
Balance of debt to capital