P4%20Describe%20sources%20of%20internal%20and%20external%20finance%20for%20a%20selected%20business.

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BTEC National in BusinessLevel 3Unit 2
Investigating Business Resources

• P4 Describe sources of internal and external
  finance for a selected business.
• ?This must be applied to a specific business, so
  choose one to base your work on now!

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Why do businesses need finance?

1. Start-up capital - new businesses need this to
   buy assets etc
2. Cash-flow firms must have enough cash
   available to fund the day to day running of the
   business (pay suppliers, creditors, wages, etc)
3. Growth - Firms may need funds for expansion
4. Unexpected shortfalls - Firms may need additional
   money at short notice to cover unexpected events

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What sources of finance do you know?

• TASK
• Make a list of any sources you can think a new or
  existing business might use to raise finance.

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Internal Sources of Finance

1. Retained Profits money re-invested back into
   the business, usually to improve/expand it
2. Improve Credit Control - making sure the people
   who owe the firm money pay on time
3. Reduce Stock Levels avoiding tying up cash
   unnecessarily by buying too much stock too soon
4. Sell Fixed Assets sell off what is no longer
   required (turn the asset back into cash)
5. Owners own funds from savings, an inheritance,
   or the sale/financing of personal assets

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External Sources of Finance
Short Term Working capital

• Bank Overdraft
• Trade Credit
• Factoring
• Bank Loan
• Leasing
• Hire Purchase
• Commercial Mortgage
• Share Issue/Venture Capital
• Grant (from government/other sources)

Med. Term Specific Purpose
Long Term Specific Purpose
TYO - 2008
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Your presentation should identify suitable
sources for

• Premises
• Equipment
• Fixtures and fittings
• Stock
• Advertising (for the opening)
• Cash flow needs
• The value of each will depend on your chosen
  business discuss your ideas with your teacher
  first!

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To choose the right source of finance businesses
must consider

• Amount needed?
• For how long (the term)?
• What is the money needed for?
• How quickly is it needed?
• How much does the finance cost?
• (Rate of interest and any fees)

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http//www.bized.co.uk/educators/16-19/business/ac
counting/presentation/sourcefinancemap.gif
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Sources of information to get you started

• http//www.bized.co.uk/virtual/bank/business/finan
  ce/sources/index.htm
• http//www.bbc.co.uk/schools/gcsebitesize/business
  /finance/sourcesoffinancerev1.shtml
• http//tutor2u.net/business/gcse/finance_other_ext
  ernal_finance.htm
• http//www.berr.gov.uk/whatwedo/enterprise/enterpr
  isesmes/info-business-owners/access-to-finance/pag
  e37736.html

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Additional sources added Nov. 2012

• http//www.philipallan.co.uk/pdfs/txtbusga09.pdf
• https//www.acceleratedstudynotes.com/2012/10/24/3
  -1-sources-of-finance/
• http//www.tutor2u.net/business/finance/finance_so
  urces_smes.htm
• http//www.bized.co.uk/educators/level2/finance/le
  sson/sources1.htm