1. Business Finance In this chapter we will look at:
Why a business needs Finance
Internal v External Finance
Short Term/Medium Term/Long Term Finance for a Business Debtors v Creditors

2. BELIEVE IT OR NOT….SOME OF THIS STUFF WILL BE REVISION OF WHAT WE LOOKED AT IN PREVIOUS CHAPTERS

5. Medium (1-5) or Long Term (5+) and paid back over many years

6. Put the following into Short-Term/ Medium- Term/ Long- Term Expenditure
Wages
Land
Electricity Bill
Furniture
Delivery Van
Petrol
Factory
Buildings
Stationary
Nuclear Power Plant
Computer
Photocopier

7. What will a bank look for to supply a business finance?
Credit Worthiness
Amount and Duration of loan
Purpose of the loan
Ability to meet repayments
Business Plan
Collateral

8. Selecting a source of finance
A business should always look at:
Amount: Example an overdraft for €200, a long term loan for €200,000. A business needs to ensure they select the best source. Cheap items may be suitable to short term finance, and more expensive ones to long term finance
Cost: Factors such as interest rates and repayment structures should be taken into account- generally the cheaper the better. A wise business shops around
Risk: What collateral (security on the loan) is required and what do you lose if you cannot meet the repayment

9. Internal vs External
A business will match its source of finance to expenditure. There is no point in taking out a mortgage to buy a pencil for your desk or trying to use a credit card to pay for a few acres of land. You assess what you need and what source of finance suits you best.
Therefore, you must decide what source of finance you will use that will best benefit your company. These sources can be internal- as the money comes from inside the company )e.g. profits/ shares, or external- as the money comes from outside the company- e.g. bank loan.

10. Firms Own Cash Internal
Short-Term Finance
Bank Overdraft
External
Creditors
External
Factoring of Debtors
External

11. Short- Term Finance
Internal: Own Cash: This is the firm using their own money available to pay for goods and services. You should take into account the opportunity cost of having the money in the bank earning interest.

12. Leasing
External
Medium-Term Finance
Term Loan
(External)
Hire Purchase
External

13. Medium-Term Finance
Internal: Medium Term Loan: Borrowing money from the bank to purchase an assest. Be mindful of interest rates

14. Long- Term Finance Debentures External Shares Internal
Sale and Leaseback
External
Long-Term Loan
External
Long- Term Finance
Retained Profits
Internal
Grants
External

15. Long- Term Finance
Shares: The firm sells shares to the public and uses the cash to pay for things.
Any profits made are shared to the public
Long-Term Loans: This would be like a mortgage over a period of over 20 years.
Repayments would need to be paid
Retained Profits: This is putting the firms profits back into the company
Debentures: A certificate issued that is secured against a long term debt. Interest is also paid
Sale and Leaseback: This is the selling of an assest and leasing back over time.
The firm receives a large injection of cash and the rent back the property.
Grant: This comes from the government. It is used to set up or expand the business