1. 1.3.5 Obtaining finance Do you know your money?
Match the correct colour and picture on the back to each denomination
£5 Purple Sir John Houlbon 1st Governor of the Bank of England
£10 Blue Sir Edward Elgar Composer
£20 Red Elizabeth Fry Prison Reformer
£50 Brown Charles Darwin Naturalist
1.3.5 Obtaining finance
BUSS1.3.5 Obtaining finance

2. Need for finance In pairs complete the diagram below Rent premises
Why do businesses need finance?
To start and grow a business finance is needed.
Why will it be difficult for a new entrepreneur to fund start-up without raising finance?
BUSS1.3.5 Obtaining finance

3. Short-term sources of finance
Overdrafts
The ability to withdraw more money from a bank account than you actually have
Interest rates are often very high
Trade credit
A supplier will normally allow other businesses a set amount of time e.g. 28 days before payment is required
This can be a lifeline when a business has cash flow problems
Interest payments have to be paid on overdrafts and bank loans. This means that the business will have to pay back a greater amount than they borrowed.
BUSS1.3.5 Obtaining finance

4. Long-term sources of finance
Bank loan
A set amount of money borrowed from the bank to be paid back over a period of time
Interest has to be paid on the amount borrowed
Personal savings
No interest to be paid and you retain ownership
Retained Profit
Can be reinvested to expand business
Venture capital
Venture capitalists (VCs) will invest large sums of money in a business in return for shares in the company
Share capital
Shares represent ownership of a company. Tend to be family shareholders in a private limited company
Ordinary shares will pay a dividend (a share of the profits) and give voting rights (one vote per share)
Always have a business plan!
Bank management - Some Mothers Do 'Ave 'Em - BBC classic comedy
BUSS1.3.5 Obtaining finance

5. Long-term sources of Finance
Source of finance
Advantages
Disadvantages
Bank Loan
lump sum
clear terms and conditions
may also get support
interest payments
strict conditions
needs to be agreed
Personal savings
Immediately available
retain control
high risk
could lose everything
Profit
Allows for expansion
Interest free
Owners may require dividend
May be small for a new business
Venture capital
Quick and easy access
May come with expertise
Lose share of business
Loss of independence
Shares
Limited liability
Restricted to family/friends
Pay dividend
BUSS1.3.5 Obtaining finance

6. Sources of finance In pairs
Lucas wants to set up a small business selling hand made wooden games and puzzles over the internet. He has identified that he needs £50000 to set up his business. Place 5 possible sources of finance for Lucas in rank order of preference, justifying your ranking.
Source of Finance
Ranking
Justification
BUSS1.3.5 Obtaining finance

7. End 30 Second Timer How many banks can you name? Your time starts NOW!
BUSS1.3.5 Obtaining finance

8. Sources of Finance
Mandy used to work as a costume designer at her local theatre until she left work 3 years ago to bring up her daughter Natalie, now 4 years old. Mandy now works from her house in Slough where she provides, makes and sells hand made glove puppets. At the moment she sells at local craft fairs and through word of mouth. She now wants to expand her business to include an on line shop and also to provide puppet shows for children’s parties and puppet making workshops for slightly older children's parties.
Question time
Identify 2 reasons why Mandy may need to raise finance.
Explain 1 advantage and 1 disadvantage of taking out a bank loan.
Mandy is looking to get finance from a venture capitalist to help expand her business. Do you think this is a good idea? Justify your answer.

9. End 2 Minute Test What is meant by a source of finance?
State 3 different types of finance offered by banks
Name 2 other sources of finance
What are interest rates?
End
BUSS1.3.5 Obtaining finance

10. MULTIPLE CHOICE
1. Which two of the following are the most appropriate sources of finance to use for buying a new store
Select two answers.
□ A Venture capital
□ B Trade credit
□ C Overdraft
□ D Sales revenue
□ E Bank loan
1. A, E
BUSS1.3.5 Obtaining finance 10