Presentation on theme: "Unit 2 Assignment 4-P4 sources of finance"— Presentation transcript:
1Unit 2 Assignment 4-P4 sources of finance BTEC BusinessUnit 2 Assignment 4-P4 sources of finance
2IntroductionThere are two main ways businesses can access finance: from within the business (internal) and from outside the business (external)
3What methods of finance could be used for a small business? Sources of Finance
4Internal Sources of Finance Internal sources of finance can be from savings or profits. The owner of the business often has to use their personal savings to start the business, particularly if they are a sole trader.This is because banks may not be willing to take the risk and invest in them.Why are savings a good source of finance?
5Internal Sources of Finance Once a business is operating it may be able to use the money that it makes as profit to reinvest back into the business.Investing money back into the business means that even greater potential profits to be invested into the business.The amount of profit that the business reinvests depends upon how much the owner wants to keep for themselves against how much they wish the business to expand.
6External Sources of Finance There are a number of different external sources of finance that can be used by the business.BanksBuilding societiesHire purchaseLeasingVenture capitalFactoring/Debt FactoringShare IssueFriend or FamilyGovernment Grants
7P4- ScenarioKate has decided to set up her own business selling cupcakes. Produce a table to show all of the methods of finance available to Kate.
8Task 1 Source (description) Advantage Disadvantage Length (Short, medium, long term)Suitability of methodShare Issue- this is....You are in control of how many/% issuedLoose part of you business can include loss of controlHire Purchase this means....No large initial costThe resources isn’t owned until the last payment has been made