Sources of Finance – Location 3.1 Standard Grade Business Management

Finance Available  In order to pay for location start-up, run or expansion, a business will need finance either:  Internal  External  Depends on:  Business Size and Type  Purpose of Finance  Amount Needed

Capital Bank Loan Family Loan Overdraft Government Assistance Where does the money come from? EU Assistance

CAPITAL How much the owner personally has to invest in the business –balance sheet  Redundancy  Inheritance  Savings

BANK LOANS Amount you borrow from a bank for a set period of time and with an agreed repayment schedule Advantages:  Can budget accordingly  Fixed timescale  Lower interest rate Disadvantages:  Require regular cash flow  Secured against business assets  Secured against personal assets

FAMILY LOANS Can be a good way to long/short term finance. Family are likely to be more supportive of your idea and more flexible than banks Advantages:  Less likely to require security  Profits stay in family  Lower interest rate or perhaps none at all Disadvantages:  Relationships put under pressure  Failure means family lose money  Family may interfere in business

OVERDRAFTS More suitable for short-term running costs. More flexible than a loan but more expensive – higher interest rate Advantages:  Flexible – only pay interest on amount of money you use  Good solution for short-term daily business needs Disadvantages:  More expensive than a loan  Can be secured against business assets

GOVERNMENT SUPPORT Government will give financial assistance as a means of encouraging businesses into certain areas. Such as areas with high unemployment and industrial dereliction CENTRAL GOVERNMENT (Parliament Level) LOCAL GOVERNMENT (Council Level) Policies are made to try and make sure all regions are treated fairly and equally in terms of employment, wealth and living standards

CENTRAL GOVERNMENT  GRANTS – usually one-off payments that do not have to be paid back (Regional Selective Assistance – manufacturing/service  ENTERPRISE ZONES – encourage business start ups in areas that businesses are leaving – lower taxes, regulations  URBAN DEVELOPMENT CORPORATIONS – Responsible for developing infrastructure of a depressed area  TRAINING AND ENTERPRISE COUNCILS – Provide funding and training for workers in depressed areas  SMALL BUSINESS LOAN GUARANTEE SCHEME – Gov’t guarantees banks that they will pay 80% of loans to small businesses

LOCAL GOVERNMENT  Promote area through advertising  Give information on grants, financial help  Information about local sites and premises  Provide grants for local business start-ups  Provide grants for Research and Development  Give grants to relocate in designated areas  Provide free rent/rates for certain properties  Give loans at a reduced interest rate