Explain the sources of initial nance, that need to be taken into account when seeking to establish a new business.

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I am working for the Hounslow Chamber of Commerce as a trainee manager. My job is to provide a guide explaining the sources of initial finance that need to be taken into account when seeking to establish a new business. It is important for entrepreneurs to identify and understand the difference sources of initial finance. They will need to choose them carefully as some may be risk free but some will have an element of risk; therefore, it’s important to choose sources of finance carefully.

The first way the entrepreneur can gain initial finance is from their own personal savings. Savings is when a person keeps back money aside to use at a later date. The entrepreneur will use their own personal savings to start up the business. Money they have saved over a long period of time. A good thing about using personal savings is that it is risk free; this is because it’s your own money, therefore you don’t have to pay it back or with interest. However, if they use all personal savings, and there was an emergency there will not be any more money to use.

Another way to get finance is by using retained profit. Retained profits is the profits the business keep behind and is set aside for other things. If the entrepreneur owned a previous business, they may be able to use retained profits from one business to start a new one. Retained profits are risk free as you don’t have to pay it back, or with high amounts of interest. Nevertheless, if they use all of the retained profits they won’t have any other funds to use in an emergency.

Legacies is another way they can gain cash to start up the business. Legacies is when someone leaves you money in a will. This money is risk free as you don’t have to pay it back with interest. Yet alike to the previous ways to gain finance, once all the money is gone, there are no funds in case of an emergency.
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Furthermore, you can gain initial finance with lottery winnings. Lottery winnings are risk free as don’t have to pay it back with interest. However, there are very low chances to win the lottery and interest that is earned whilst the money is in the bank is taxable.

Gifts from friends and family could be a source of initial finance. Gifts are risk free as no payback or interest is required.

Additionally, you can gain finance from angels or dragons. If angels or dragons like your idea they will invest money to help run the ...

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