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

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Introduction

P4: Describe sources of internal and external finance for a selected business. Tesco: Internal sources: Internal sources of finance can be from the business owner?s savings or from profits. * Owner?s savings: The owner of a business often has to use their own personal savings to start the business, particularly if they are a new sole trader (a person who owns and runs their business). 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 eh control of the owner. The owner of tesco can use his savings and start up the business. ...read more.

Middle

* Banks: Banks are able to offer loans, business accounts, commercial mortgages and overdraft facilities based on the business plan. Interest is payable based on the predicted risk. Some security will need to be provided, for example, assets such as a house. Bank can provide loan to tesco. * Building societies: Building societies are also able to offer loans, business accounts, commercial mortgages and overdraft facilities based on the business plan. Interest is payable based on the risk of the venture. As with banks, some security will need to be provided, such as assets. Tesco has a good history so building socities can provide loan to tesco. * Hire purchase: Hire purchase means that resources can be used by the business while they are being paid for to a finance company. ...read more.

Conclusion

Limited companies are then able to sell shares on the stock exchange if they become public limited companies (PLC). This is known as floating on the stock exchange. Sometimes large PLCs will have a new share issue as well when they want to invest in a large project and these are also floated on the stock exchange. Tesco can issue shares. * Government grants and Prince?s Trust loans and grants: These are available from the EU, national government and local government. A grant is money given to an entrepreneur that does not have to be paid back and the amount of that money will depend on where it is coming from(for more information, see www.businesslink.gov.uk). Businesses run by people between the age of 18 and 30 can apply for low-interest loans from the Prince?s Trust (www.princess-trust.org.uk). Tesco can have government grants and loans as it is an old business and has a very good history. ...read more.

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