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Investigating Business Resources Unit 2 P3

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Investigating Business Resources Unit 2 P3 Sources of Finance Introduction Whether you are thinking of starting up your own business or if an existing business is thinking of expanding, it is likely that money will be needed. The money needed to start a business is called business finance. There are two mains ways that businesses can access financial resources: from within the business (internal source) or from outside the business (external source). Internal Sources These are sources of finance that come from the business' assets or activities. Traditionally, the major sources of finance for a limited company were internal sources: Retained Profit The amount of profit remaining after tax and distribution to stockholders that is retained in a business and used as a reserve or as a means of financing expansion or investment. This is a cheap and flexible form of finance. When a business makes a profit and it does not spend it, it keeps it and accountants call profits that are kept and not spent retained profits. The retained profit is then available to use within the business to help with buying new machinery, vehicles, and computers and so on or developing the business in any other way. Sale of Assets The business can finance new activities or pay-off debts by selling its assets such as property, fixtures & fittings, machinery, vehicles etc. ...read more.


This ownership transfer either automatically or on payment of an option to purchase fee. Leasing Leasing is a contract between the leasing company, the leaser, and the customer. The leasing company buys and owns the asset that the lessee requires. The customer hires the asset from the leasing company and pays rental over a period for the use of the asset. There are two types of leases: * Finance Leases- A finance lease is a lease that is primarily a method of raising finance to pay for assets, rather than a genuine rental. * Operating Leases- A lease for which the lessee acquires the property for only a small portion of its useful life. An operating lease is commonly used to acquire equipment on a short-term basis. Any lease that is not a capital lease is an operating lease. (http://www.investorwords.com/3461/operating_lease.html) Venture capitalists Venture capital is money put into an enterprise which may all be lost if the enterprise fails. A businessman starting up a new business will invest venture capital of his own, but he will probably need extra funding from a source other than his own pocket. The directors of the company must contact venture capital organisations, to try and find one or more which would be willing to offer finance. A venture capital organisation will only give funds to a company that it believes can succeed, and before it will make any definite offer, it ...read more.


Development award can be used to buy clothes for a job interview or a new job, covers your fees for training course and its pays for travel costs to a work placement training course or job. You get a grant which is up to �500.this grant is not for university fees and organisations. * Community Cash Awards- Community Cash Awards are grants to help you set up a project that will benefit your community. You get a grant of up to �5000 to support and help plan your project, research your budget, set goals and learn about your community. Projects must be run and managed by people between 16-25.it must clearly benefit the community, the people running the project and be a new or developing project. Personal savings Personal savings are amounts of money that a business person, partner or shareholder has at their disposal to do with as they wish. Although we would generally discuss personal savings as a source of finance for small businesses, there are many examples where business people have used substantial sums of their own money to help to finance their businesses. A Jamie financed his new restaurant, 'Fifteen', using fifteen raw recruits to the catering trade and a large amount (�500,000) of his own cash. Good and very public example here is Jamie Oliver, the television chef. ?? ?? ?? ?? Anton Prinson Sritharan BTEC BUSINESS NATIONAL UNIT 2 ...read more.

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