S1 Personal Finance - Lesson 2

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Now that we have looked at finance option available to individuals, where do you think businesses can get money from?

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Why do you think this small business needs finance?

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From your interpretation of the video clip, where did they get their finance from?

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What are the risks involved getting this finance from the dragon?

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What are the rewards involved in getting the finance from the dragon?

Categorize

Options (16)

•It is owner’s own money so don’t have to pay interest to anyone.

•It is quick and easy to access the money.

•Usually only small amounts can be raised.

•The owner could lose his own money if the business fails.

•Quick to raise the finance.

•Does not increase the debt of the business.

•Still relatively small amounts of finance raised.

•Using profit for one thing means they can’t be used for something else.

•Can provide large sums of money, especially for start-ups.

•They often bring expertise and advice to the business to help succeed.

•Venture Capitalists usually want a high share of the business (ownership stake) in return.

•There is high pressure to grow very quickly.

•Fixed, regular payments mean the business can budget.

•Large amounts of finance can be raised.

•Full amount paid back plus interest.

•There can be penalties for late payment.

Apply your learning so far and ategorise the risks & rewards into the following sources of finance...

Owner's Own Savings

Retained Profits

Venture Capitalists

Bank Loan

Open Ended

A sole trader needs £5000 to purchase initial stock for their new online shop. Suggest the best source of finance available and give a reason why.

Open Ended

A local coffee shop wants to buy a new coffee machine for £10,000. They have made a profit for the last few years and are quite popular in their local community. Suggest the best source of finance available to them and give reason for your answer.

Open Ended

A small business wants to expand into new premises but needs £100,000. Suggest a source of finance available to them and give reasons why.