• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Describe the major sources of finance available to business, and the advantages and disadvantages of each source.

Extracts from this document...


Describe the major sources of finance available to business, and the advantages and disadvantages of each source. Businesses need finance (funds), there are many reasons why businesses need finance usually to expand and grow, both in the short term, and long term, to expand, operate or just plain survive. Assets sale Companies may choose or be forced to sell-off assets of the business in order to raise finance. However a disadvantage of selling assets is that it can be very destructive, it would be like selling off the business and splitting the business into pieces. Overdrafts An overdraft allows the business to overdraw from there account as a means to raise finance, an advantage of businesses using this source of finance is that an overdraft can be arranged fairly quickly and offer a level of flexibility with regard to the amount borrowed at any time, which means the business can overdraw the exact money and pay for what is only overdrawn whilst interest is only paid when the account is overdrawn. A disadvantage of this source of finance is that it is the first thing that gets paid off before bills, staff, etc. ...read more.


The advantage of this source of finance is that it is an easy way of raising finance when nobody else will help. The disadvantage of this source of finance is that the business will loose control, because of the constant influence in the running of the company by the venture capitalists. Savings This is the businesses own savings, an advantage of using this source of finance is that the money is available to the business quickly, and is available readily to the business, another great advantage is that because it's the businesses own savings it means it is readily available to use as it is free. A disadvantage of using this source of finance is that there may not be enough money saved up by the business and it could increase the risk that they spend all of their money for expansion and not having any leftover when a cash flow problem arrives. Friends and Families This finance is provided by family and friends, the advantage of borrowing from families and friends is that they are likely to lend some cash, an disadvantages of asking friends and family is that they may not have enough cash to fund the ...read more.


Trade credit is the largest use of capital for a majority of types of businesses and is a critical source of capital for a majority of all businesses. An advantage of it is that the business can have the goods and services before paying for them whilst allowing time for the business to generate money for them selves and paying for other expenses. An disadvantage of it is that it goves the business time in which to pay for the goods or iterms purchased whilst allowing the business to still generate capital. Shares Selling shares in a company is one way of raising long-term finance for a business. This is also known as equity finance. The advantage of equity finance is that you don't have to repay the finance or pay interest on it as you would with an overdraft or bank loan. Shares represent ownership in a company. When an individual buys shares in a company, they become one of the owners of the business. This entitles them to a share of the distributed profits of the company, known as dividends. However the disadvantage of it is that when selling shares someone may come along and build up on shares thierfore takeing responsibily of some part or whole of the company. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level ICT in Business section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level ICT in Business essays

  1. Advantages and Disadvantages of e-commerce in terms of easyjet

    easyJet has their own internet caf´┐Ż's throughout the UK which are known as easyInternetCafe. This allows customers to go on whatever websites they want but since they are in environment advertising the easy brand they are likely to be reminded to visit the easyJet website.

  2. In this coursework I need to produce a detailed business report on one medium-sized ...

    Tesco is the largest on-line grocer in the world, and through the rapid development of its e-business Tesco is now offering customers real choice and value on the internet. Tesco.com is new 100% subsidiary company that runs company's e-commerce business, which is an important part of company's future strategy.

  1. In this piece of work I will be looking at the Swedish born business ...

    This can prove to be very time consuming for the business. Setting up an L.T.D. Setting up an L.T.D is quite a complicated process that requires a number of vital documents. As well as requiring at least one shareholder, one secretary and one director, the company must complete 2 forms.

  2. Business Venture - Dance Club

    What they do to choose which business venture to help they interview managers of the company (which will be me ) and they support the most promising business plans, plans which will really run doesn't matter that they are too risky for the banks.

  1. E2: describe and explain the objectives of the business

    It means that pursuing the highest quality in products, in service, in technology and in all our cooperate activities. By devoting ourselves to attaining that goal, we earn the trust of our customers. * They strive to define the standard for excellence in every tyre category in every nation around the world.

  2. Describe the major sources of finance available to businesses, and the advantages and disadvantages ...

    The interest rate is not high as it is only 6%, which is not bad. Disadvantage The Disadvantage of this is that the bank would make sure that the borrower had sufficient security in case the loan could not be repaid so that they can take the borrower assets.

  1. Sources of Finance

    This will include; your initial stock, tills, your computers, your telephones, your fax machines, your sound system, your security system etc. to purchase this machinery and equipment you will need to use medium-term sources of finance. These could be; a bank loan, this is a quick and easy source of finance, but this would mean paying interest.

  2. How can Finance be Raised for a Business

    If the business does not succeed, the lease can be sold to someone else. * Hire Purchase Businesses, like individuals, buy goods on hire purchase. This allows immediate access to asset without having to pay the full price. With the hire purchase system the business hires the asset until the final payment is made and then the asset is owned.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work