Sources of Finance Scenario

Jed and Nicola had been keen on Music for several years.  They had visited shops regularly and investigated many different types of equipment. Jed also worked occasionally as a DJ at birthday parties, weddings and other events.  He was an expert in setting up and troubleshooting the equipment he used. Because of this expertise, Jed was often asked by friends for advice about  buying media equipment. Eventually, they decided to turn their hobby into a business by opening a (a)   in the local town centre.

• Shop
• Warehouse

They found a suitable shop premises to rent and fortunately found that between them they had enough savings (a)   to pay for any renovation works and stock.  However they were confident that the bank would allow them to have a small deficit for the first month, this would them allow them to pay the first months rent upfront ​ (b)   Type question here including an

• Owners Capital
• Overdraft
• Factoring

Finally money was  still needed money for display equipment, as such they found a company that would be willing to provide them with the necessary equipment which they could pay for on a monthly basis, when the last month was paid for the equipment would then become their own (a)  

• Hire Purchase
• Leasing

Business was slow at the beginning, but early satisfied customers told their friends about the shop and within six months, Jed and Nicola had made enough profit to invest in a special booth where customers could assess the sound quality of the equipment more easily (a)  

• Retained Profit
• Owners Capital

The business continued to do well and Jed and Nicola decided that their customers would appreciate having the equipment they purchased being delivered to their homes. However, instead of buying a van they found a method whereby they could pay each month and all the servicing and repair bills would be included . (a)  

• Leasing
• Hire Purchase

After a couple of years they decided to open another shop in a neighboring town. Profits had been good, but there was not enough to completely purchase and fit a new shop so they approached a bank to borrow the money needed for the premises and agreed to pay back the money within twenty-five years ​ (a)   The money from fixtures and fittings was also raised from the bank, but it was agreed that this money would be paid back in 3 years ​ (b)  

• Mortgage
• Loan

After six years Jed and Nicola owned five shops, all of which were within a 15-mile radius of the first shop.  One day they received a telephone call from a man called Paul who said that he worked for a type of finance company called Fast Track. He explained that his company specialised in investing in small businesses which were doing well and had the potential to grow (a)  

• Venture Capital
• Share Capital

After 12 years the target number of shops had been opened. Fast Track was happy that the value of tis investment had grown but now wanted to release its money for other ventures. Paul suggested that it was time to use the Stock Exchange to raise money (a)   . The company had now grown quite large, and Jed and Nicole were struggling to manage the debts of the business, therefore they decided to sell these debts to a company who would collect these debts on their behalf ​ (b)  

• Share Capital
• Factoring