1. Sources of Finance BUSINESS SUITABILITY You will Understand that the type of business organisation will determine the suitability of the source of finance used

2. Recap We said that the type of finance used will depend on a number of factors: – Why the finance is needed – The amount – The firm’s profit levels – Risk level – E.g. Would a small business easily get a loan

3. 1 What are the 4 main legal structures a business can set up as? BASICALLY A BUSINESS WILL SET UP AS EITHER A: Sole trader – one person Partnership – 2-20 people Private Limited Company – sell shares to friends and family Public Limited Company – sell shares on the stock exchange

4. Structures Key facts: – http://www.bbc.co.uk/dragonsden/business/ente rprise/company-structures.shtml http://www.bbc.co.uk/dragonsden/business/ente rprise/company-structures.shtml

5. Definitions Unlimited liability – Responsible for all the debts of the business Limited Liability – Lose only amount invested

6. Sole Trader Possible sources of finance Owner’s savings, bank loans Becoming a partnership Issues for consideration Evidence that the business has potential Credit rating of business Business plan

7. Becoming a partnership Not only investment what else?

8. Partnership Possible sources of finance Partner’s savings, loans and hire purchase/leasing Key issues for consideration Suitability of partner Should they form a limited company Unlimited liability

9. Private Limited Company Possible sources of finance – Banks loan, leasing/hire purchase, trade credit, government grants, venture capitalists, private share issues Key issues for consideration Disagreement Hard finding shareholders Loss of control Collateral may be requested

10. Think of a PUBLIC limited company

11. Public Limited Company Possible sources of finance Trade credit, leasing/hire purchase, government grants and bank loans, venture capitalists, public share issues Key issues for consideration State of economy Ability to relocate = government help Recent financial performance Company reputation

12. Interactive Quiz http://www.tutor2u.net/business/quiz/source soffinance/quiz.html http://www.tutor2u.net/business/quiz/source soffinance/quiz.html

13. Extension questions Explain why a new business needs finance? Describe the implications of a firm with unlimited liability. Discuss what type of finance might be suitable for the launch of a restaurant.

14. How to answer an exam type question