Why businesses need money

1
Why businesses need money
Businesses need extra money at times because

• They are just starting and need to buy premises
  and equipment.
• They have an opportunity to introduce a new
  product or service.
• A major item of equipment or building needs to be
  brought up to date.

2
The sources of funds 1

• Owners funds savings of the owner or an
  additional mortgage taken out on their house.
• Profits profits which have been retained and
  not paid out as dividends.
• Loans from a bank or other financial
  institution.
• Government grants available for specific
  reasons, eg expanding in a deprived area.

3
The sources of funds 2

• Hiring and leasing this saves having to buy
  expensive items outright as payments are made in
  regular instalments.
• Issuing shares only applies to public limited
  companies whose shares are bought and sold on the
  Stock Exchange.
• Selling assets such as unwanted buildings or
  spare land.
• Venture capital finance from a company which
  specialises in lending to successful small
  businesses often in exchange for shares.

4
Factors affecting the choice of funding
5
Making the choice 1 internal sources
6
Making the choice 2 bank options
7
Making the choice 3 other external sources
8
Making the choice 4 other external sources