Unit 3 – Sources of Finance All types of business need money to? Write 4 things down. Buy supplies – from suppliers Pay staff Buy equipment Pay bills Pay rent / mortgage for building

Sources of finance Internal – money from inside the business External – money from outside the business

Internal Finance 1) Reinvesting profits – called retained profits. Money left over after all costs have been paid. 2) Working capital – money used by business on a day to day basis to pay for supplies / bills. Cash in till, bank etc 3) Sale of assets – land, buildings etc

External Sources 1) Bank loans – money obtained from banks which paid back over a period of time in monthly instalments. Interest charged. End up paying more back. May need to offer security – e.g. building 2) Share capital – part of business sold for £ - shareholders become part owners. Receive payment based on profit called – DIVIDENDS Available to – private and public limited companies. Only Public can sell shares to anyone. Expensive to set up public sale.

Unit 3 – Sources of Finance 3) Trade Credit – getting supplies and being able to pay for them later e.g. 30 days, pay by end of month 4) Overdraft – agreed facility with a bank to spend more than is in bank account up to an agreed limit. Interest can be charged 5) Government Grants – financial help from the government To do - A) Make notes from page 116 – 117 on government grants B) Copy the table page 116 C) Complete the question sheet

SWOT FOR Buckland Livery Stables Ltd – complete this on A4 Strengths Good – inside the business Weaknesses Bad – inside the business Opportunities - Extra ways to bring in £ Threats -Competitors -External trends

Sources of finance 1) New stables ? – bank loan, mortgage (extend mortgage), retained profit ? – enough profit? 2) Buy 12 horses ? Loan, retained profit, hire purchase? 3) Rent more land? Retained profit, overdraft Prepare a list of good and bad points for all options.

Issues to Consider Before a Major Expansion 1.Full outline of costs 2.Likely earnings 3.Break even ? How many customers to pay back costs. 4.Profitability ? How likely, when? 5.Customer use ?– questionnaire / research 6.Competitors – how many, what sort? 7.Income levels in area – recession 8.Impact on other activities – disruption, staffing, poaching