Sources of Finance
Internal Sources
The business may decide to keep existing machinery rather than invest in new or reassign finances previously allocated for the purchase of new machinery.
Retained Profits
The businesses profits are not distributed to the owners or shareholders but are held back in reserve.
Stock Reduction
The stocks which a business holds in store can be worth a great deal of money. The business may decide to reduce the amount of stock, thus saving on the purchase of new stock.
Asset Sales
The business may decide to sell some of its belongings or holdings.
Limiting Credit to Customers
When a business allows a customer credit it is effectively lending its customer money. The business can save money by reducing the amount it lends.
Government Grants
The business may take advantage of the one of the governments financial aid schemes for
businesses.
Overdrafts and Loans
The business may borrow money from a bank over either a long or short period.
Borrow Friends and Family
Small businesses particularly may be able to borrow from friends or family at little or no interest.
Extended Credit from Suppliers
The business may decide to take more advantage of credit offered by its suppliers.
Hire Purchase and Leasing
A business may lease certain items of equipment such a photocopiers,
thus saving the cost of buying them.
Owners' Capital
The owners(s) personal savings may be used to finance the business.
3: Why Do Businesses Need Money?
4: Where Do Businesses Get Money?
To the Starting Point
To the Pivot Point