Secondly disadvantages: if the business is unsuccessful it could mean you loss all your money, the owner have to work hard/ overtime for success as s/he have invested vast amount of money n the business, and also when invested money often quickly turned into long term fixed assets which cannot be readily converted into cash.
Hire Purchase is a method of obtain assets without having to invest the full amount in buying them. Typically, a hire purchase agreement allows the hire purchaser sole use of an asset for a period after which they have the right to buy them, often for a small or nominal amount. There are advantages and disadvantages of using this for financing expansion which are; firstly advantages: enables businesses to gain immediate use of the asset without having to pay a large amount for it or without having to borrow a large amount, agreements are easily negotiated and available, the hirer can recover the writing down costs and VAT on the assets, and also alow business to have a better cash flow.
Secondly disadvantages: you can't sell the assets until the money's paid off , creditors can ask you to return the asset if you don't make regular payments, and also high interest rates due to inflation.
This is a very simple concept as when a business makes profits is not the money which came in that they are going to use. The business keeps some which their accountants calls retained profits. Retained profits is a good form of financing expansion as the business will be able to use its own profits for expansion which will be easy and affordable. With this source of financing your expansion comes its advantages and disadvantages.
Firstly advantages: no interest rate as there is no repayment worries, no VTA on profits, flexible as it the business so they chose on what to do with it.
Secondly disadvantages: the business will have to forgo interest on profits,owner might make no profit for him self as s/he might put all the money back in the business.
Trade credit means that a creditor such as, supplier of raw materials will allow you to buy goods now and pay for them later. Why is this a form of expansion? Well, if we manage your creditors carefully they can use the trade credit in place to provide to finance other parts of business. In using this source comes its advantages and disadvantages.
Firstly advantages: builds a good relations with suppliers, enables the business to trade on credit as you pay for goods at the agreed time period, and also gives the business good reputation among creditors as more business will be offering you to trade on credit with them.
Secondly disadvantages: the business must have a good credit history as well as financial
Depreciation is a fixed asset reduced in value over its useful life due to wear and tear. This a good from of expansion as the business will pay less on the asset needed, which will enable them to concentrate on other aspect of the business. With this source of financing expansion comes it advantages and disadvantages
Firstly advantages: the business spend less on assets, the business get the use of asset immediately as wells agreements are easily negotiated.
Secondly disadvantages: the asset might be old and not to be used in the long term development, and as the business is looking to expand it this might not be a good idea.
Credit card allows business to spend on things good that they are unable to afford at particular time and pay back later with interest on them. This is a form of financing gives a self-managed small business access to a line of credit up to a prescribed limit without restriction on the use of funds. With this source come advantages and disadvantages.
Firstly advantages: no collateral is required, no financial statements or business plans is needed, Flexible repayment options, no transaction fees on purchases, and lastly descriptive billing statements.
Secondly disadvantages: Cost of borrowing may be higher than under a formalized operating line of credit, it is unsecured and is granted without the requirement for formal financial statements or business plans.
A fixed asset is anything that is not used up in the production of the good or service concerned - land, buildings, fixtures and fittings, machinery, vehicles and so on. At times, one or more of these fixed assets may be surplus to requirements and can be sold. This is a good form of financing expansion for every form of business as it enables you to raise funds which can contribute to the business expansion.With this source come advantages and disadvantages. Firstly advantages: the business will be able fro raise funds need quickly, as well as easily negotiated.
Secondly disadvantages: the asset will not retain it original value as they tend to go down in value as years go by, and also
Share issuing is also another for of financing expansion as businesses can increase their ownership by increasing their amount of share. This form of financing expansion does not apply to all business as not all businesses are owned by share holders. Advantages and disadvantages of using this source.
Firstly advantages: enables the business to rise funds quickly and efficiently, flexible as well as accessible because there are no limits on the amount of share you can offer.
Secondly disadvantages: risky as the company losses ownership to a takeover bid, the business has making satisfactory profits to convince new/ existing to invest more in the business.
A mortgage is also a form of long-term loan, but with this it is secured on land or a building or some other fixed asset. This a good form of financing expansion for all types of business as it enables them to buy assets for the business that they pay back on an agreed monthly instalment and also as it is a long term financial agreement makes it an ideal form of expansion as that is a long term process. Advantages and disadvantages of using this source.
Firstly advantages: the business immediate access to asset whiles still paying to it, is a long term which gives business flexibility on repayments.
Secondly disadvantages: rate of interest may vary with market rates, if the business fails to meet repayment dates the lender can start legal proceedings to repossess the asset.
Debentures are loans that are usually secured and are said to have either fixed or floating charges with them. A secured debenture is one that is specifically tied to the financing of a particular asset such as a building or a machine. A debenture issued with a floating charge means that the interest rate is not fixed and such debentures are usually not tied to any specific asset such as land or buildings. This is a good form or financing expansion as it enables business to raise funds quickly in a short period of time. This is an ideal form of financing expansion for every business from a sole trader to a PLC. Advantages and disadvantages of using this source.
Advantages: quick way of raising funds, as it is long term process businesses don’t have to worry about repayments.
Disadvantages: interest rate on borrowing might go up due to inflation, business can losses assets if they fail on repayment agreement.
- Venture capitalist:
- Bank overdraft:
- Government assistants:
- Leasing:
- Debt factory: