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Research on sources of finance in a business

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Introduction

Research on the Sources of Finance for a Business Firms sometimes need to raise finance for Working Capital and Capital Expenditure. Explain what each is and give examples. Working Capital (or Revenue Expenditure) The working capital is made up of the current assets net of the current liabilities. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital. Capital Expenditure is used for buying fixed assets where large sums of money are involved but they are not purchased often e.g. new premises. List and explain factors that determine how much and what type of finance a business might need. � Size of the Business. � Type of the Business. � Where the business is in terms of its development. ...read more.

Middle

Sale of Assets An established business has assets. These can be sold to raise cash. The business loses the asset but has the use of the cash. It makes good business sense for businesses to dispose of redundant assets. They can finance development without extra borrowing. If the asset is needed, it may be possible to sell it, but immediately lease it back. In this way, the business has use of the cash and the asset. This is known as the sale and leaseback. External Finance Overdraft Overdrafts tend to be more flexible and do not carry the same various requirements of security of a loan. Overdrafts are more suited for day to day expenses incurred through running the business. It is not suitable for capital expenditure or to cover start-up costs for any length of time. When a business has problems with cash flow an overdraft would help to keep the cash flowing Bank loan The bank can ...read more.

Conclusion

Venture Capital A company is suitable for venture capital investment if it exhibits high growth prospects, has a product or service with a competitive edge or unique selling point and has a strong management team. To this the person will have to value the business, and will then have to look for investors. Grants All publicly funded schemes are designed to encourage new and growing businesses to bring wealth and ultimately create jobs. To help achieve this government make available a portion of the taxpayer's money to help and encourage enterprise. This cash gets distributed through a variety of ministries, departments and agencies on a national and local, most businesses are eligible at any one time to apply for a number of different grants and support which in are distributed in a wide variety of forms. Factoring Factoring is a flexible form of loan, which advances money to a company as it issues new invoices. This is different to overdrafts or more formal loans, which are usually for a fixed amount. ...read more.

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