Sources of Business Finance: Short Term and Long Term Options

The video discusses various sources of business finance, emphasizing the importance of acquiring the right amount of funding to meet business needs. It covers short-term finance options like bank overdrafts and trade credit, and long-term options such as loans, share capital, and venture capital. The video also highlights the need for businesses to carefully consider their finance needs and choose the appropriate funding source, weighing factors like cost, timing, and security.

Why is it crucial for businesses to acquire the optimal amount of funding?

• To reduce employee salaries

• To avoid paying taxes

• To increase their market share

• To ensure they can meet their financial obligations and grow

What is a common reason for businesses to seek short-term finance?

• To purchase new machinery

• To expand into new markets

• To hire new employees

• To manage seasonal cash flow problems

Which of the following is a short-term finance option?

• Retained profits

• Bank overdraft

• Venture capital

• Issuing shares

What is a primary use of long-term finance for start-up businesses?

• To pay employee bonuses

• To invest in short-term projects

• To fund start-up capital like machinery and equipment

• To cover daily operational costs

How can a business secure a loan if a bank is reluctant to lend?

• By reducing the loan amount

• By securing it against assets they own

• By extending the repayment period

• By offering a higher interest rate

What is a potential downside of using retained profits for financing?

• It involves high interest rates

• Not all businesses have profits to retain

• It dilutes ownership

• It requires selling company assets

Which finance option involves selling an equity stake in the company?

• Share capital

• Trade credit

• Bank loan

• Personal savings

What is a key consideration when choosing between debt and equity financing?

• The location of the business

• The cost and implications of each option

• The number of employees

• The color of the company's logo

Why might crowdfunding not be a viable option for all businesses?

• It involves high interest rates

• It requires a large marketing budget

• It is only available to tech companies

• It depends on public interest and is uncertain

What should businesses consider when determining how much funding to raise?

• The number of competitors

• The age of the company

• The location of their headquarters

• The amount of equity they are willing to dilute