AS Business

1. Do Now!
What do you need to buy?
1) Ice-cream parlour
2) Hairdressers
3) Café
4) Clothes store
How might you fund this?

2. Raising Finance

3. Learning Objectives
By the end of this lesson you should be able to:
1. Explain the difference between internal and external
sources of finance
2. Understand the various sources of internal and external
finance
3. Analyse the appropriateness of various sources of
internal and external finance for different needs.

4. Internal Sources of
Finance
What are internal sources of Discuss in pairs and come up
finance and where do they with….
come from?
3 advantages of this source
Owners personal funds
of finance.
Friends and family
Retained profit
3 disadvantages of this
Income from the sale of an
asset source of finance.
LO1) Explain the difference between internal and external sources of finance

5. External Sources of
Finance
Loan Capital – Overdraft
What is an overdraft?
Temporary loan from a bank that allows a business to withdraw
excess money from their account, up to an agreeable limit.
Benefits Drawbacks
1. It is an ………….….. source of 1. …………… can be charged for use
finance. of an overdraft.
2. Quick and …... .. to arrange. 2. Arrangement ……….. can be high.
3. Can be used to manage ……... flow 3. Overdraft can be ……….. at short
when a business has a shortage. notice.
LO1) Explain the difference between internal and external sources of finance

6. External Sources of
Finance
Loan Capital – Bank loan
What is a bank loan?
A sum of money lent for a fixed period of time, repaid over an
agreed schedule. The cost of the loan is paid in interest.
Benefits Drawbacks
1. ………… is fixed for the period of 1. …..…… is paid regardless of
the loan. Making ……………. easier. whether the business is making
profit.
2. The loan is …………. for set period.
2. The loan may have to be secured
3. The ……….. does not get a say in against a personal ……………
how the business is run.
LO1) Explain the difference between internal and external sources of finance

7. External Sources of
Finance
Share Capital
What is a share capital?
Money paid by an investor for a share in the business.
What does this mean?
Owners sell a share/ part ownership of the business.
Capital does not have to be paid back.
Shareholders paid through dividends when profits received.
Business Angel Venture Capitalist
• Individual wanting to invest • Professional Investor or business
• Can invest between £10, 000 and • Can invest £250,000 or more
£250,000
LO1) Explain the difference between internal and external sources of finance

8. Overdraft, Loan or Share Capital?
Can be used to manage cash flow when a
business has a shortage?
OVERDRAFT
LO2) Understand the various sources of internal and external finance

9. Overdraft, Bank Loan or Share
Capital?
It may have to be secured against a
personal asset.
BANK LOAN
LO2) Understand the various sources of internal and external finance

10. Overdraft, Bank Loan or Share
Capital?
It be withdrawn at short notice.
OVERDRAFT
LO2) Understand the various sources of internal and external finance

11. Overdraft, Bank Loan or Share
Capital?
Capital does not have to be paid back.
SHARE CAPITAL
LO2) Understand the various sources of internal and external finance

12. Overdraft, Bank Loan or Share
Capital?
Interest is paid regardless of whether the
business is making profit.
BANK LOAN
LO2) Understand the various sources of internal and external finance

13. Raising finance in action
Watch the Dragon’s
Den Video….
Find out more about
the Kirsty’s brand.
LO2) Understand the various sources of internal and external finance

14. Advising Businesses
In pairs, you are to act as
business advisors…..
Suggest a suitable source of
finance for each given business
including the reasons for your
choice.
Prepare to feedback to the rest
of the group.
LO3) Analyse the appropriateness of various sources of internal and external finance for different needs.

15. Write on your whiteboard….
A disadvantage of using
your own money to
raise finance.

16. Write on your whiteboard….
An advantage of a
venture capitalist to
raise finance.

17. Write on your whiteboard….
A disadvantage of using
share capital to raise
finance.

18. Write on your whiteboard….
An advantage of using a
bank loan to raise
finance.

19. Re-cap Learning Objectives
You should now be able to:
1. Explain the difference between internal and external
sources of finance
2. Understand the various sources of internal and external
finance
3. Analyse the appropriateness of various sources of
internal and external finance for different needs.