Business finance: needs and sources

Learning objectives

Give the five main reasons a business needs finance: to start up, to expand, to replace non-current assets that have worn out, to invest in new technology and to provide working capital

Tell a short-term need for finance from a long-term one, and match the source to how long the money is needed

Weigh the internal sources of finance — retained profit, money put in by the owners, the sale of assets the business no longer needs, and cash released from working capital

Weigh the external sources of finance: from a bank (an overdraft or a loan), from investors (share capital, venture capital, crowdfunding), from suppliers of goods or equipment (trade credit, leasing, hire purchase) and from the state (a government grant)

Explain what decides the right source: what the money is for, how much is needed and for how long, what it will cost, what the business already owes, and how large the business is and what legal form it has

Choose a source of finance for a business in a case study and defend the choice