Business Finance Sources of Finance. Brainstorm on different types of finance available Sources of finance Bank Loan Savings Overdraft Factoring services.

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Presentation transcript:

Business Finance Sources of Finance

Brainstorm on different types of finance available Sources of finance Bank Loan Savings Overdraft Factoring services Venture Capital Commercial mortgages Venture Capital

Sources of Finance When starting a new or existing business finance is required. Finance can either be internal for example your own savings which you may want to invest, or external for example a loan from the bank

Sources of Finance Available (External) There are a number of different types of finance available externally we have already referred to different sources of finance briefly. Each of them will be looked at in more detail.

Sources of Finance Available (Ctd) Bank Loan Overdraft Hire Purchase/Leasing Commercial Mortgages Venture Capital Government Grants (Business Link) Business Angels

BANK LOAN This will be your main source of finance, depending on which bank you obtain the loan from the interest rate will will vary. You also need to bear in mind that a bank loan can either be a short or a long term method of finance. Repayment period for your loan will be 2-10 years max.

OVERDRAFT An overdraft facility gives the right to be able to withdraw funds you do not currently have it also:  Provides flexibility for your business  Interest is only paid on the amount overdrawn  Overdraft limit the maximum amount allowed to be drawn  It will provide you finance when you need to pay bills.

COMMERCIAL MORTGAGES A long term source of finance which enables a business to borrow 80% of the value of the property which is repayable over a period of up to 25 years. Your premises will be taken as security for the loan. If the business fails, the premises will be sold to repay the bank (note: you are unlikely to take out this type of finance for your product or service)

HIRE PURCHASE/LEASING A HP agreement enables a business to buy equipment and machinery on deposit and the business has to pay back the cost plus interest over a period of time. Hire purchase is often used to buy vehicles and machinery Leasing: this enables a business to lease equipment and you simply pay rent for the items leased usually for a period of 2-7 years

VENTURE CAPITAL Another source of finance is venture capital which provides finance for fixed assets and for working capital. Venture capital companies basically invest money in the form of loans or purchase of shares and in return they normally expect some control over the company.

GOVERNMENT GRANTS Government grants are available for new businesses where business link maybe willing to provide some financial assistance to a newly set up business depending on the location of the business.

BUSINESS ANGELS Individuals looking for investment opportunities Generally small sums available up to £100,000 Provide money to an individual or a small group Business generally have some say in the running of the business