SHORT TERM SOURCES OF FINANCE. BANK OVERDRAFT ADVANTAGES Allows the firm to take out more money than they actually have in their bank account. Relatively.

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Presentation transcript:

SHORT TERM SOURCES OF FINANCE

BANK OVERDRAFT ADVANTAGES Allows the firm to take out more money than they actually have in their bank account. Relatively cheap Simple to arrange DISADVANTAGES Can work out expensive if used for a long time If you exceed limit, can have facility withdrawn and incur expensive charges.

TRADE CREDIT ADVANTAGES Firms buy goods now and pay for them later Helps when experiencing cash flow problems DISADVANTAGES If you dont pay in time, suppliers may not supply you on credit again.

FACTORING ADVANTAGES Sell the debt to another company Improves cash flow as you are getting some money Factor chases up the debt DISADVANTAGES Dont receive the full amount owed to you Factors will only be interested in large amounts

GRANTS ADVANTAGES Does not need to be paid back DISADVANTAGES One-off payment Lot of paperwork Not always going to get one

RETAINED PROFITS ADVANTAGES Profits kept back from previous years, dont need to borrow so much money DISADVANTAGES Can mean that growth of the business is slow.