finance for soletrader and partnership

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Shazad Din        Unit 7        19/11/2007

        Task 1

        P1

        M1

Pass 1

Finance for sole trader and partnerships

The sources of finance available to sole traders and partnerships are limited. The finance listed below is the finance available to sole traders, partnerships, public limited company and private limited company.

The finance below is the finance available to sole trader and partnerships.

Loans – different types of loans are available to small businesses they are limited from £1000 to about £25,000 depending on where the loan is taken from. The loan is quick and easy to arrange with fixed monthly payments with interest.  Most small businesses get a loan for investment or maybe expanding and then try to pay back the loan back as soon as possible with there less interest rate.  This can be paid back from 12 months to up to 10 years.  There are options to protect the loan with illness, sickness and accidents.      

Grants –What is the money given to a business from the government to help it succeed but not everyone is entitled to this.  The money that is given does not have to be given back.  

Mortgage – This is a loan you take out to buy property. Most banks and building socialites offer mortgages, as well as specialist’s mortgage lending companies.  If you change lenders but do not move business it’s referred as a remortgage.    This can be taken out of any bank and will be paid back with interest and will last for sometime up to 25 years or even more and the money lending will be depending on income. Your business can be repossessed if you don’t keep up with repayments with your mortgage and this is in the contract and is signed for.  

Trade credit – is interest free in most cases. A small business buys stock from a supplier but pays for it in 30 days time but if it is not paid then the supplier will not allow the trade credit again and also interest might be charged on this too.

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Overdraft – this is the money the business does not have and goes over the bank balance called an overdraft and pays back with a minimum interest rate at the end of the month also with flexibility as when the payment is paid back.  If this is not paid at the end of the month then the interest keeps building up but interest is only paid on the money you use. You can also choose whether you need the overdraft for one month or for up to 12 months.

Hire purchase – known as HP it is a common way ...

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