1. BTEC National in Business Level 3 Unit 2 Investigating Business Resources
P4 Describe sources of internal and external finance for a selected business.
This must be applied to a specific business, so choose one to base your work on now!
TYO 2014

2. Why do businesses need finance?
Start-up capital - new businesses need this to buy assets etc
Cash-flow – firms must have enough ‘cash’ available to fund the day to day running of the business (pay suppliers, creditors, wages, etc)
Growth - Firms may need funds for expansion
Unexpected shortfalls - Firms may need additional money at short notice to cover unexpected events
TYO 2014

3. What sources of finance do you know?
TASK:
Make a list of any sources you can think a new or existing business might use to raise finance.
TYO 2014

4. Internal Sources of Finance
Retained Profits – money re-invested back into the business, usually to improve/expand it
Improve Credit Control - making sure the people who owe the firm money pay on time
Reduce Stock Levels –avoiding tying up cash unnecessarily by buying too much stock too soon
Sell Fixed Assets – sell off what is no longer required (turn the asset back into cash)
Owner’s own funds – from savings, an inheritance, or the sale/financing of personal assets
TYO 2009

5. External Sources of Finance
Short Term
Working capital
Bank Overdraft
Trade Credit
Factoring
Bank Loan
Leasing
Hire Purchase
Commercial Mortgage
Share Issue/Venture Capital
Grant (from government/other sources)
Med. Term
Specific Purpose
Long Term
Specific Purpose
TYO 2009
TYO

6. Your presentation should identify suitable sources for:
Premises
Equipment
Fixtures and fittings
Stock
Advertising (for the opening)
Cash flow needs
The value of each will depend on your chosen business – discuss your ideas with your teacher first!
TYO 2014

7. To choose the right source of finance businesses must consider:
Amount needed?
For how long (the “term”)?
What is the money needed for?
How quickly is it needed?
How much does the finance cost?
(Rate of interest and any fees)
TYO 2014

8.
TYO 2014

9. Sources of information to get you started
TYO 2014

10. Additional sources added Nov. 2012
TYO 2014