2. 3.1 Finance and Support for a Small Business 3 F INANCE 3.1 F INANCE AND SUPPORT Do you know your money? Match the correct colour and picture on the back to each denomination £5PurpleSir John Houlbon 1 st Governor of the Bank of England £10BlueSir Edward Elgar Composer £20RedElizabeth Fry Prison Reformer £50BrownCharles Darwin Naturalist

3. HERE ARE THE ANSWERS 3.1 F INANCE AND SUPPORT

4. ANSWERS  £5 Blue Fry  £10 Brown Darwin  £20 Purple Elgar  £50 Red Houblon 3.1 F INANCE AND SUPPORT

5. 3.1 F INANCE AND S UPPORT FOR A S MALL B USINESS  In this topic you will learn about  Sources of finance  Sources and types of advice available to small businesses 3.1 F INANCE AND SUPPORT To start and grow a business finance is needed.

6. N EED FOR FINANCE 3.1 F INANCE AND SUPPORT Why do businesses need finance? Rent premises Why will it be difficult for a new entrepreneur to fund start-up without raising finance? In pairs complete the diagram below

7. S OURCES OF FINANCE  So where can a small business get money from?  The Bank 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 Overdraft  The ability to withdraw more money from a bank account than you actually have  Interest rates are often very high Mortgage  A long term loan secured against an asset, normally a building 3.1 F INANCE AND SUPPORT Can you define interest rates? Always have a business plan!

8. S OURCES OF FINANCE  So where can a small business get money from?  Friends and family Terms and conditions can be agreed between you and them May be an informal arrangement  Grants Financial support given to a business Maybe a government initiative or charitable trust 3.1 F INANCE AND SUPPORT

9. S OURCES OF FINANCE Source of FinanceRankingJustification 3.1 F INANCE AND SUPPORT 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.

10. 30 S ECOND T IMER End How many banks can you name? Your time starts NOW!

11. S OURCES OF F INANCE Source of finance AdvantagesDisadvantages Bank Loan lump sum clear terms and conditions may also get support interest payments strict conditions needs to be agreed Overdraft flexible provides back up high interest can be withdrawn Mortgage regular repayments lump sum secured against an asset repayments may be high Friends and family flexible may be cheap or even free could spoil relationships depends on availability Grants often with added support may not need to be repaid often difficult to qualify 3.1 F INANCE AND SUPPORT

12. S OURCES OF F INANCE 3.1 F INANCE AND SUPPORT 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 1.Identify 2 reasons why Mandy may need to raise finance. (2 marks) 2.Explain 1 advantage and 1 disadvantage of taking out a bank loan. (4 marks) 3.Mandy is considering applying for an additional mortgage on her house to finance the business expansion. Do you think this is a good idea? Justify your answer. (9 marks) Remember for the 9 mark question you need to weigh up both sides before reaching a conclusion.

13. S OURCES AND TYPES OF ADVICE AVAILABLE  There is a lot of help available for new businesses  High Street Banks Small business advisors Consultants Accountants  Government Organisations Department for Business, Innovation and Skills Business Link Regional Development Agencies  Charities The Prince’s Trust  They offer a wide range of expertise and support from drawing up a business plan, marketing, working with suppliers and securing finance to employing staff and growing your business. 3.1 F INANCE AND SUPPORT

14. R ESEARCH TASK  Visit the Business link website at www.businesslink.gov.uk to research the types of advice offered by Business link www.businesslink.gov.uk  Design a poster to be displayed at an enterprise conference that will encourage potential entrepreneurs to use the help offered by Business link 3.1 F INANCE AND SUPPORT

15. 2 M INUTE T EST  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?  State 2 sources of advice for small businesses End