Sources of Finance

What is an overdraft?

• A very long-term loan (20-30 years) taken out on property.

• Paying for an asset in instalments and the asset will be owned when the last payment is made.

• A bank allows a business to overspend on its current account up to an agreed limit.

• When a sum of money is given for a specific purpose.

Debt factoring is when a business will sell its debts or invoices which have not yet been collected from another company/customer (i.e., invoices) to a third party (called a factor) at a discount, for example 85 per cent, in exchange for immediate c (a)  

Which one of these is a benefit of an owner investing their own savings?

• Low levels of interest

• You can borrow large amounts of money

• You do not have to pay it back

Venture capitalists invest money into a high risk business in return for a s (a)  

A benefit of using venture capitalists as a source of finance is that they can:

• Offer advice and guidance for the running of your business.

• Lend you money without any return

Trade Credit is when an agreement made between businesses which allows the exchange of goods, without an immediate exchange of m (a)  

A sole trader can raise money through the sale of shares?

• True

• False

A way to raise money for a specific project by asking a large number of people to donate money.

• Debt Factoring

• Venture Capital

• Crowdfunding

• Trade Credit

A problem of share capital is?

• Only raise a small amount

• You can lose control of the business

• You do not have long to pay it back

• Interest

Which one of these is NOT an external source of finance?

• Venture capital

• Loans

• Retained profit

• Debt Factoring