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I need to research sources of finance. The reason for this is so that I will be able to recommend the appropriate source/s of finance, which will benefit Happy Hols Ltd to its maximum. I will write this in a report format.

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Introduction

Task 7- Sources of finance Plan * I need to research sources of finance. The reason for this is so that I will be able to recommend the appropriate source/s of finance, which will benefit Happy Hols Ltd to its maximum. I will write this in a report format. This is a task in itself and so is important. I will get this from textbooks and from my teacher's knowledge and notes. Happy Hols Ltd want to invest in the extension of camping holidays, but it needs a source of finance, which will enable it to do so. I will investigate the main sources of finance and recommend the most appropriate one/s for Happy Hols Ltd. There are many sources of finance, which would all provide the business with a quick source of money, which will have to be paid back. But the amount the company needs can limit them to a range of sources of finance and methods of repayment e.g. interest. The sources of finance can be split up into three types; long term, medium term and short term. Long term finance is mainly for companies who need a large sum of money, which would be difficult to be paid back, this would be used to provide start-up capital to finance the business for its whole lifespan, finance the purchase of assets with a longer life, such as buildings and provide expansion capital for large projects, such as building a new factory or taking over another business. The repayment as it is so much would be paid over a number of years rather than straight away. Medium term finance is again for high sums of money needed but not as high as long term, these usually would be used to finance the purchase of assets with a two to five year life, such as vehicles and computers, to replace an overdraft which is difficult to clear and is proving expensive and to finance a change in strategy, such as to switch marketing focus from Britain to the whole of Europe etc. ...read more.

Middle

Though this is a good idea, as Happy Hols Ltd is a small company they will have to pay higher rates of interest on the repayments. Happy Hols Ltd could also use sale of shares to gain the finance to invest in the extension of camping holidays. First of all they would have to put the amount of shares that would have enough value for them to pay the campsite owners and to pay for the additional costs, then they would be able to get the campsite up and running. With the profits they will be able to pay the commission to the owners and keep the rest to re-invest. Though this again is a good idea (especially to the person/s who buy the shares), the administrative costs are high, prices of the shares can be difficult to value, and you might end up selling more shares one time for a certain value but another time a smaller amount of shares might cost the same value. Another way Happy Hols Ltd could invest in camping holidays is through re-investing its profits into paying the campsite owners to use the area. Then from the profits they can pay the commission to the owners, and keep the rest. This is a fairly good idea if Happy Hols Ltd makes a lot of profit as they will not have to do anything else e.g. sell anything to gain the finance, but just carry on maximising profits. But if they do not make much or any profits it would take an extremely long time for them to get the required capital. From the sources of finance mentioned above, all these allow Happy Hols Ltd to pay the campsite owners the money to use the campsite, make a profit, pay the commission and pay any debts. But this all depends on how successful the business is in its business venture. ...read more.

Conclusion

The only downside with it is that security has to be paid up, though there is not an expensive negotiation fee or are shares given to the lender as an equity stake, as with Venture capitalists. Also the repayments can be flexible so the can be quicker or slower to be repaid, but if the company want to get the loan paid as soon as they can, it is possible rather than the company having to keep the repayments for a very long period of time such as a mortgage. As you can see I have decided on sources of finance for both ways of investigating in camping holidays from which I done through the investigating and analysing of the possible sources of finance. But both will have their downsides, and so I will use the knowledge I gained from the sources of finance to recommend the best way of investing in the extension of camping holidays. I have chosen to start a joint venture with an existing camping site or camping holiday company. The main reasons for this is because it would be cheaper in paying back the repayments and that if the company want to one day change their plans, that they do not want to concentrate on camping as much any more they could get out of the venture quicker than with the other possible investment. The reason for this is that the company would have to sell the land, but would have to get a buyer first and if they cannot get one fast enough they might loose money e.g. camping not popular to customers anymore. This way of investing does have its strong points over the over such as there would be no disagreements between the two companies, but the repayments of the loan would be much harder to cope with if the plan failed. I researched this through textbooks, my own knowledge and the teacher's note. The strengths of it are that is very detailed, the weaknesses are that it is very long and not very concise. I would improve it by making it more concise. ...read more.

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