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BTEC Business Unit 2 Assignment 4-P4 sources of finance.

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Presentation on theme: "BTEC Business Unit 2 Assignment 4-P4 sources of finance."— Presentation transcript:

1 BTEC Business Unit 2 Assignment 4-P4 sources of finance

2 Introduction  There are two main ways businesses can access finance: from within the business (internal) and from outside the business (external)

3 What methods of finance could be used for a small business? Sources of Finance

4 Internal 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?

5 Internal 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.

6 External Sources of Finance  There are a number of different external sources of finance that can be used by the business.  Banks  Building societies  Hire purchase  Leasing  Venture capital  Factoring/Debt Factoring  Share Issue  Friend or Family  Government Grants

7 P4- Scenario  Kate has decided to set up her own business selling cupcakes. Produce a table to show all of the methods of finance available to Kate.

8 Task 1 Source (description) AdvantageDisadvantageLength (Short, medium, long term) Suitability of method Share Issue- this is.... You are in control of how many/% issued Loose part of you business can include loss of control Hire Purchase this means.... No large initial cost The resources isn’t owned until the last payment has been made


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