4. Internal and External Sources Internal Sources of Finance Come from trading of business Day to day cash from sales to customers Money loaned from trade suppliers through extended credit Reductions in amount of stock held by business Disposal (sale) of any surplus assets no longer needed (e.g. selling a company car) External finance Comes from individuals or organisations who do not trade directly with business E.g. banks, investors. government
7. Short and Long-term Finance Short term finance Needed to cover day to day running of business Paid back in a short period of time, so less risky for lenders Long term finance Tends to be spent on large projects which will pay back over a longer period of time More risky so lenders tend to ask for some form of insurance or security if company is unable to repay loan. A mortgage is an example of secured long-term finance
8. Short term:finance the business for up to 1 year Medium term: finance the business for up to 5 years Long term:finance the business for more than 5 years
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12. Internal and external finance Finance can be obtained from either internal or external sources Internal means it comes from within the business External means it is obtained from outwith the business
