Sources of Business Finance
This final section explores various sources of business finance, both short-term and long-term, that companies can use to fund their operations and growth. Understanding these options is crucial for effective cash flow management strategies and overall financial planning.
Short-term financing options include bank overdrafts, which allow businesses to spend more than their current account balance, and trade credit, where firms pay suppliers at a later date. Long-term financing methods include share capital, where a firm sells partial ownership of the business, and loans or mortgages from banks.
Vocabulary: Crowdfunding is a modern financing method where a business raises small amounts of money from a large number of investors, typically through online platforms.
Highlight: Personal savings from business owners can be an important source of finance, especially for small or new businesses.
Example: Share capital involves selling a percentage of company ownership in exchange for investment, which can provide substantial funding but dilutes ownership.
Definition: Bank overdraft is a short-term financing option where a bank allows a business to spend more money than it has in its current account, providing temporary cash flow relief.
