Sources of Finance Presentation BTEC Business

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Sources of Finance Presentation BTEC Business Powered By Docstoc
					 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 2009
  Produce a PowerPoint presentation
 for a the owners of the new business
1. Introduction: state the aim of the presentation and
   describe the business you will be advising about their
   options (your chosen business scenario)
2. Overview: Explain the difference between internal
   and external sources of finance
3. Main Body: For each source of finance you should
  – what it is, what it is best used for and where is comes from
  – the pros and cons of using it
  – how suitable it would be for the business
4. Conclusion: sum up which sources of finance you
   feel are best suited to the your chosen business
                            TYO 2009
What sources of finance do you know?
Make a list of any sources you can think a new
or existing business might use to raise finance.

                     TYO 2009
The sources you need to cover:
• Internal sources of finance: owner’s
  savings, capital from retained profits
• External sources of finance: business
  loans, overdrafts, commercial mortgage,
  factoring, hire purchase, leasing, venture
  capital (venture capitalists/business angels,
  investment companies, friends and family),
  share issue, grants (RDAs/government, E.U.,
  Prince’s Trust), trade credit
                      TYO 2009
     Why do businesses need finance?

1. Start-up capital - new businesses need this
   to buy assets etc

2. Cash-flow – firms must have enough ‘cash’
   available to fund the day to day running of the
   business (pay suppliers, creditors, wages, etc)

3. Growth - Firms may need funds for expansion

4. Unexpected shortfalls - Firms may need
   additional money at short notice to cover
   unexpected events
                       TYO 2009
      Internal Sources of Finance
1. Retained Profits – money re-invested back
   into the business, usually to improve/expand it

2. Improve Credit Control - making sure the
   people who owe the firm money pay on time
3. Reduce Stock Levels –avoiding tying up cash
   unnecessarily by buying too much stock too
4. Sell Fixed Assets – sell off what is no longer
   required (turn the asset back into cash)
5. Owner’s own funds – from savings, an
   inheritance, or the sale/financing of personal
   assets               TYO 2009
                                External Sources of Finance
             Working capital
                                • Bank Overdraft
Short Term

                                • Trade Credit
                                • Factoring
             Specific Purpose

                                • Bank Loan
Med. Term

                                • Leasing
                                • Hire Purchase

                                • Mortgage
             Specific Purpose
Long Term

                                • Debenture
                                • Share Issue/Additional Owner
                                              TYO -2009
                                              TYO 2008 Investment
 To choose the right source of finance
      businesses must consider:
1. Amount needed?

2. For how long (the “term”)?

3. What is the money needed for?

4. How quickly is it needed?

5. How much does the finance cost?
    (Rate of interest and any fees)
                     TYO 2009

                                           TYO 2009
 Sources of information to get you started

                        TYO 2009

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