Sources of Finance

1
Sources of Finance Location 3.1

• Standard Grade Business Management

2
Finance Available

• In order to pay for location start-up, run or
  expansion, a business will need finance either
• Internal
• External
• Depends on
• Business Size and Type
• Purpose of Finance
• Amount Needed

3
Where does the money come from?
EU Assistance
Capital
Government Assistance
Stationery
4U
Bank Loan
Overdraft
Family Loan
4
CAPITAL
How much the owner personally has to invest in
the business balance sheet

• Redundancy

• Inheritance

• Savings

5
BANK LOANS
Amount you borrow from a bank for a set period of
time and with an agreed repayment schedule

• Advantages
• Can budget accordingly
• Fixed timescale
• Lower interest rate

• Disadvantages
• Require regular cash flow
• Secured against business assets
• Secured against personal assets

6
FAMILY LOANS
Can be a good way to long/short term finance.
Family are likely to be more supportive of your
idea and more flexible than banks

• Advantages
• Less likely to require security
• Profits stay in family
• Lower interest rate or perhaps none at all

• Disadvantages
• Relationships put under pressure
• Failure means family lose money
• Family may interfere in business

7
OVERDRAFTS
More suitable for short-term running costs. More
flexible than a loan but more expensive higher
interest rate

• Advantages
• Flexible only pay interest on amount of money
  you use
• Good solution for short-term daily business needs

• Disadvantages
• More expensive than a loan
• Can be secured against business assets

8
GOVERNMENT SUPPORT
Government will give financial assistance as a
means of encouraging businesses into certain
areas. Such as areas with high unemployment and
industrial dereliction
CENTRAL GOVERNMENT (Parliament Level)

• LOCAL GOVERNMENT
• (Council Level)

Policies are made to try and make sure all
regions are treated fairly and equally in terms
of employment, wealth and living standards
9
CENTRAL GOVERNMENT

• GRANTS usually one-off payments that do not
  have to be paid back (Regional Selective
  Assistance manufacturing/service

• ENTERPRISE ZONES encourage business start ups
  in areas that businesses are leaving lower
  taxes, regulations

• URBAN DEVELOPMENT CORPORATIONS Responsible for
  developing infrastructure of a depressed area

• TRAINING AND ENTERPRISE COUNCILS Provide
  funding and training for workers in depressed
  areas

• SMALL BUSINESS LOAN GUARANTEE SCHEME Govt
  guarantees banks that they will pay 80 of loans
  to small businesses

10
LOCAL GOVERNMENT

• Promote area through advertising

• Give information on grants, financial help

• Information about local sites and premises

• Provide grants for local business start-ups

• Provide grants for Research and Development

• Give grants to relocate in designated areas

• Provide free rent/rates for certain properties

• Give loans at a reduced interest rate