Sources of Finance

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Sources of Finance Obviously to start my business I will need a large amount of capital which will could be gained through a number of methods which I will describe below pointing out the advantages and disadvantages of each one and then deciding whether it would be a good choice for the business. Overdraft – This is a sum of money borrowed from the bank, usually for the purchase of small things such as stock, the advantages is its easy to obtain and quick however the main disadvantage is that you are charged daily interest on the money borrowed. This could be useful to the business once it is operating and making a profit however it would not be wise to get into debt with daily interest so early in the business’s lifeShare Issue / Investor – This is the sale of part of the business for an amount of capital, the advantage is that it is quick and sometimes the investor can also help and/or offer advice, however an obvious disadvantage is that you are loosing complete ownership of the company. I think that this could be a possibility
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for my company as it will need capital at the start and I would not mind selling a section of the company if it were to provide capital which would take the business further.Retained Profit – This is finance which is obtained from successful trading, when the business makes money and it keeps it in the business it is known as retained profit. The advantage is that the money is already in the business and your not borrowing any money, however a disadvantage is that it will only work with more successful companies that turnover a large enough profit to ...

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