BTEC National in Business Level 3 Unit 2 Investigating Business Resources P4 Describe sources of internal and external finance for a selected business.

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BTEC National in Business Level 3 Unit 2 Investigating Business Resources P4 Describe sources of internal and external finance for a selected business. This must be applied to a specific business, so choose one to base your work on now! TYO 2014

Why do businesses need finance? Start-up capital - new businesses need this to buy assets etc Cash-flow – firms must have enough ‘cash’ available to fund the day to day running of the business (pay suppliers, creditors, wages, etc) Growth - Firms may need funds for expansion Unexpected shortfalls - Firms may need additional money at short notice to cover unexpected events TYO 2014

What sources of finance do you know? TASK: Make a list of any sources you can think a new or existing business might use to raise finance. TYO 2014

Internal Sources of Finance Retained Profits – money re-invested back into the business, usually to improve/expand it Improve Credit Control - making sure the people who owe the firm money pay on time Reduce Stock Levels –avoiding tying up cash unnecessarily by buying too much stock too soon Sell Fixed Assets – sell off what is no longer required (turn the asset back into cash) Owner’s own funds – from savings, an inheritance, or the sale/financing of personal assets TYO 2009

External Sources of Finance Short Term Working capital Bank Overdraft Trade Credit Factoring Bank Loan Leasing Hire Purchase Commercial Mortgage Share Issue/Venture Capital Grant (from government/other sources) Med. Term Specific Purpose Long Term Specific Purpose TYO 2009 TYO - 2008

Your presentation should identify suitable sources for: Premises Equipment Fixtures and fittings Stock Advertising (for the opening) Cash flow needs The value of each will depend on your chosen business – discuss your ideas with your teacher first! TYO 2014

To choose the right source of finance businesses must consider: Amount needed? For how long (the “term”)? What is the money needed for? How quickly is it needed? How much does the finance cost? (Rate of interest and any fees) TYO 2014

http://www.bized.co.uk/educators/16-19/business/accounting/presentation/sourcefinancemap.gif TYO 2014

Sources of information to get you started http://www.bized.co.uk/virtual/bank/business/finance/sources/index.htm http://www.bbc.co.uk/schools/gcsebitesize/business/finance/sourcesoffinancerev1.shtml http://tutor2u.net/business/gcse/finance_other_external_finance.htm http://www.berr.gov.uk/whatwedo/enterprise/enterprisesmes/info-business-owners/access-to-finance/page37736.html TYO 2014

Additional sources added Nov. 2012 http://www.philipallan.co.uk/pdfs/txtbusga09.pdf https://www.acceleratedstudynotes.com/2012/10/24/3-1-sources-of-finance/ http://www.tutor2u.net/business/finance/finance_sources_smes.htm http://www.bized.co.uk/educators/level2/finance/lesson/sources1.htm TYO 2014