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Explain the sources of initial nance, that need to be taken into account when seeking to establish a new business.

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Introduction

Transfer-Encoding: chunked I am working for the Hounslow Chamber of Commerce as a trainee manager. My job is to provide a guide explaining the sources of initial finance that need to be taken into account when seeking to establish a new business. It is important for entrepreneurs to identify and understand the difference sources of initial finance. They will need to choose them carefully as some may be risk free but some will have an element of risk; therefore, it?s important to choose sources of finance carefully. The first way the entrepreneur can gain initial finance is from their own personal savings. Savings is when a person keeps back money aside to use at a later date. The entrepreneur will use their own personal savings to start up the business. Money they have saved over a long period of time. A good thing about using personal savings is that it is risk free; this is because it?s your own money, therefore you don?t have to pay it back or with interest. However, if they use all personal savings, and there was an emergency there will not be any more money to use. ...read more.

Middle

It allows the cardholder to pay for goods and services based on the holder's promise to pay for them. A good thing about credit cards is that they provide protection. For instance, if you pay for something yet it doesn?t arrive, you can then gain the money back. However, you have to pay it back and with high amounts of interest. In addition, you can get a mortgage. A mortgage is an arrangement with the bank which allows you to pay monthly installments to buy a property. A mortgage can be paid over a long period of time, around 20-30 years. However, you will have to pay interest. This interest can vary; you can have fixed or variable interest or interest only, or interest and repayment mortgages. Also, if you don?t pay, your property can be repossessed. Another way is leasing. Leasing is when you rent a fixed asset for a certain period of time. Leasing is good because fixed assets can be very expensive, therefore if it breaks down, the leasing company will be responsible to fix or replace it. In addition, if the business fails you don?t have to still pay for it. ...read more.

Conclusion

It is good because it frees up cash and has low rate interest. There are many factors of criteria for investment. Firstly, you will need business plan. A business plan outlines how you will operate the business. If you don?t have one the bank won?t grant a loan, as they don?t know how organised you are or if you have you thought about everything. Next they need project viability. This is when they look at your product and they will see if it will be successful, worth investing in, if it will it be profitable in the long run and it is worth investing in. Moreover, they will need entrepreneur?s personal capital. This is how much of your own money are you prepared to put in your own business. Additionally, there are review procedures; you need to be able to review situations from time to time e.g. Budgets (why you overspent), do you have these procedures in place, for instance a contingency plan in case of an emergency. Lastly, there is financial banking. This who else is prepared to invest into your company. In conclusion, all sources of finance have risks to them. However, many have little risks and could be very beneficial when the entrepreneur is starting up their new business; making pre business start-up, a success. ...read more.

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