Internal And External Sources Of Business Finance

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The business I am going to be talking about will be a shop called news, food and wine. This shop can use a wide variety of different internal and external sources, this is why I’m going to be using this business. A shop will need business finance because they might want to expand the business, they can’t afford to pay workers or the bills or they have just started up.
Internal finance is to do with money that is coming from the owners or already in the company. However external means that the money is being taken out by the company and may not be the businesses money to be spending yet they have to pay it back.
Internal finance
Internal finance consists of the money in the business such as retained profit. Retained profit is profit made
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There is also a loan which is a large amount of money someone can lend off a bank or a loan company to buy something. This may be used in a shop to buy new stock or for expanding but they don’t have the right amount of money to expand using internal finance. Loans can be arranged to pay back in small instalments which may be suitable for the shop to give back. However loans have some interest on them therefore you have to pay extra for getting the loan, the longer it takes to pay back the more the interest will be. A mortgage is a very large amount of money that can usually be taken out from a bank to buy something like a shop or a warehouse to keep stock. A shop may be paying off a mortgage by the profit they are making while they are using the shop. For a mortgage it usually has a high interest rate due to there being a large amount of money being given out. This is used when the business does not have the bulk amount of money to pay for the shop so they will allow the bank to buy it and mortgage it to the person to pay off monthly instalments for it. Hire purchase is something that is being hired yet in the meanwhile you are paying off for it, there will be monthly payments on the item. A shop would do this if they didn’t have the right amount of money at the time of purchase so they will pay off monthly. This can also be an easier than paying in bulk
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