Investigating the Sources of Finance Essay

1271 Words 6 Pages
Investigating the Sources of Finance

I'm now going to investigate the sources of finance available to you when setting up your new business. I will separate the sources of finance needed into three categories; start-up costs, running costs and expansion costs.

When starting up your new business premises will need to be secured from which you will trade. I'm going to look at ways that you could secure premises. The first option available to you is a mortgage; these are long-term loans offered by banks or building societies based on property as collateral. Interest must be paid on the mortgage, but this will cover the original sum and when the money has been paid back, you become the owner of
…show more content…
to purchase this machinery and equipment you will need to use medium-term sources of finance. These could be; a bank loan, this is a quick and easy source of finance, but this would mean paying interest. Also the bank may require collateral, and the machinery and equipment may be repossessed if loan repayments aren't met. Another source of medium-term finance available to you is leasing. This means that a firm could lease you the machinery and equipment that you will need. However, although less initial finance is needed to obtain the assets, over time this works out more expensive than buying. Hire purchase is similar to leasing except the firm will eventually own the assets. The assets are paid for in instalments, whilst the business is using them, this however can bring with it major cash flow problems, because interest payments can be very high. My recommendation when attempting to secure a source of finance for machinery and equipment would be to get a bank loan. I recommend this because; the machinery and equipment is instantly accessible to the business allowing it to operate, also the interest payments aren't as high as hire purchase, and with a bank loan the assets become the property of the business once all repayments are met.

Fixtures and Fittings are also essential when operating from the

More about Investigating the Sources of Finance Essay

Open Document