1. Sources of Finance

2. Time Periods for Finance
Finance is generally considered to be either:
Short-term Medium-term Long-term
1 to 3 years 3 to 10 years Over 10 years

3. Sources of Finance
Sources of Finance can be either:
Internal External

4. Internal Sources of Finance
Divestment Personal Savings Sale/lease back
Reduction in
current INTERNAL
assets
Factoring
Sale of fixed assets Retained profits

5. Internal Sources of Finance
 Retained profits
Retained profits are profits that the organisation has made in
the past and has not given to owners in the form of profits or
dividends.
 Personal savings
For a sole trader or for partners, personal savings may be an
important source of finance which can be brought into the
business as additional capital.

6. Continued…
 Reduction in current assets.
The current assets of a business are generally:
 Its stocks of raw materials.
 Partly finished goods.
 Any money it is owed by its debtors.
 Any money it has in the bank or in cash.
The business should try to reduce its stock intake and the
money it is owed by its debtors in order to raise more funds.

7. Continued…
 Factoring
A factoring firm will buy a firms debts and assume the risk on
non-payment. The factor collects the debts directly from the
businesses customers.
 Sale of fixed assets
A business could sell off machinery, vehicles, land or buildings
that it no longer needs in order to raise finance.

8. Continued…
 Sale and lease back
A business sells of its assets to a finance company that then
leases the asset back to the business. This means that the
business can obtain cash when it needs it, but still have the use
of the asset.
 Divestment
The business may choose to close down, sell off or get rid of
business activities that are no longer felt to be appropriate or
viable.

9. External Sources of Finance
Short-term Medium-term
 Trade Credit  Leasing
 Overdraft  Hire purchase
 Loan  Loan

10. Continued…
Long-term
 Loan  IFI
 Share Capital  Livewire
 Mortgages  The princes youth
 Venture Capital trust
 Finance from the EU