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Sources of Finance

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Coursework- Sources of Finance I'm now going to investigate the sources of finance available to you when setting up your new business. I will separate the sources of finance needed into three categories; start-up costs, running costs and expansion costs. When starting up your new business premises will need to be secured from which you will trade. I'm going to look at ways that you could secure premises. The first option available to you is a mortgage; these are long-term loans offered by banks or building societies based on property as collateral. Interest must be paid on the mortgage, but this will cover the original sum and when the money has been paid back, you become the owner of the property. Alternatively you could choose the option of renting; this is when a weekly or monthly sum is paid to the landlord for the service of being able to trade from the property. Renting will probably be cheaper as no interest has to be paid. Another advantage is if you moved premises or ceased trading and had a mortgage, the mortgage lender would gain ownership of the premises, whereas if you rented you would only have to stop paying rent. ...read more.


Staff uniform and training costs also have to meet and I recommend that use the same source of finance to meet these costs also. Market research and advertising costs would also have to be met, but on paying the franchisor's fee and decorating your premises with their interior, the franchisor will advertise and carry out market research on your behalf. Once your business has started trading, running costs- the cost of running the business- will have to be paid on either a daily, weekly or monthly basis. The running costs of your business will be; administration, these are the day-to-day costs of running the business. These costs will include rent, insurance, electricity, stationery, telephone bills, postage etc. another running cost you will have is finance; this is the financial cost of running the business. These costs will include; paying interest to the bank if money is borrowed, bank charges and the franchisor's fee. Production is another running cost that you will have, this will be the cost of your stock bought from your supplier to sell to your customers. Human resources are another cost that you will have meet. These costs will include; staff wages and training, staff perks such as bonuses, recruitment costs, as well as meeting all health and safety regulations to ensure your staff are safe at work. ...read more.


This would create a 'chain' of stores and would establish you even further in your particular market. I would recommend that you rent the additional site rather than get a mortgage and purchase the additional site. I recommend this because if the new store fails to establish itself and doesn't become profitable, then you wouldn't have as much to lose if the store closed down. Again purchasing a new site would incur all start-up costs again. If you do choose to expand in the future I would advise you to take up the third option of renting or purchasing an additional site. My reasons for this are; there is no hassle of possibly closing down your business whilst building work takes place on your existing site. You will also have sites in two areas, making you able to establish yourself in the new area, as well as further establish yourself in the existing area, thus creating more revenue and profit. Finally there isn't as much risk as moving to a new larger site, because if your business fails in the new site everything is lost, whereas if you rent or purchase an additional site only your start-up costs will be lost if the business fails. And you will still have your old site. I hope that you will find the information provided helpful when selecting sources of finance for your new business. Jack Rankin Business Coursework Miss Lewis ...read more.

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