Sources of finance for business

An activity that looks at cash flow for Level 2.

Level 2 Business and Economics: Sources of finance for business

Introduction

Whether you are thinking of starting up your own business or if an existing business is thinking of expanding, it is likely that money will be needed. The money needed to start a business is called business finance. Where do businesses get the finance to start a business or to finance expansion?

This resource will look at some of the possibilities. When you are working through the resource, remember that some sources of finance will be appropriate for some businesses but not for others.

For an individual thinking of setting themselves up as a mobile sandwich van, the sources of finance are going to be quite different to that needed and available by someone like Liverpool Football Club when trying to build a new stadium.

A model of the new Anfield stadium - exterior view A model of the new Anfield stadium - internal view towards the north stand

Liverpool FC are planning to build a new stadium to replace the famous Anfield stadium. The cost to fund this project will be in the region of £215 million. Raising that sum of money presents different problems to raising the money to pay for setting up a mobile sandwich bar!

There are a number of factors to think about when looking at this area of business. We will be looking at the following:

An Overview of sources of finance - short term or long term?

  • Short term sources of finance:
    • Bank overdraft
    • Trade Credit
    • Leasing
    • Bank loans
    • Credit cards
  • Long term sources of finance:
    • Bank loans
    • Share capital
    • Debentures
    • Asset sales
    • Venture capital
    • Retained profit
    • Owners' capital
    • Government, local authority or EU grants

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