Sources of Finance

1627 Words Jun 30th, 2011 7 Pages
Unit 2: Business Resources

Assignment 4:P4

Sources of Finance

Internal Sources of finance

Owners’ savings- the owner of a business often has to use their own personal savings to start a business, particularly if they are a sole trader. This is because banks may not be willing to take a risk and invest in them. Savings are a good source of finance for a business, as interest does not need to be paid to someone else while the money is being used, and the business remains totally in the control of the owner. In any business venture it is always an advantage to be using your own money because the freedom of spending it how you please is up to you, however there is a high risk factor with personal savings, the chance of losing
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Leasing hosts many business opportunities for big companies and small too, it is a great method of making capitals last and reduces business cost also good for record keeping. One major disadvantage of leasing is maintaining the goods, for example if you managed a logistic delivery company and leased the vehicles if an accident occurred and the vehicle was destroyed you would be liable to pay the full amount to the leasing company and would have nothing to show for it.

Venture Capitalists- these are people who invest in new and up-and-coming risky ventures, usually in return for a share of the ownership. An advantage of venture capitalist is the establishment in the business environment they might have, if you were inexperienced you could use their knowledge of the corporate business industry, methods, tactics and strategies to make it as a new business or survive as a present business. A huge disadvantage about Venture Capitalists could be the agreements you make for instance if they wanted a short term pay out from the owner, which was a high amount and a big interest rate it might be hard to pay in the time required in the contract. Many venture capitalists would specify upon agreements that the original owner of the business has to pay back a large amount of the money invested with a usually high interest rate in a short time period. The reason for this is the Venture Capitalists want their money back and profits either made from the business or out of

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