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In the topic of external finance, there are two strands. The first is the source of finance or "where" the business owner or entrepreneur may go to get funding for start-up, growth or . The second is the method of finance, and this is the "what" and essentially describes various financial products that the business owner or entrepreneur could use to achieve their .
SOURCES OF EXTERNAL FINANCE
Sole traders, partnerships and private limited companies could approach friends and for small loans or, in some cases, a gift of money to help the business in some way. The disadvantage is that those people may expect a say in the business, so the owner may lose some control.
If there are no friends or family to ask then the simplest idea may be to approach for a loan. Business rates are very favourable and if the business is established the bank may not hesitate to lend the money. The disadvantage is that there is interest to be paid and this will need to be added to the fixed costs and could potentially lead to a negative impact on any profits made.
lending or funding is essentially where a private lender and a business are matched. This will net the lender a higher rate of return than a savings account, but they risk losing everything if the business goes bust. Ideal for start-ups or businesses who have been declined a loan by the bank.
Business are private investors who will lend cash in return for a share of the profits of the business. This typically involves smaller amounts than venture capital and is especially suitable for start-ups.
is another good alternative to bank loans for start-ups and websites. It allows entrepreneurs to advertise their business to potential investors. They need to attract enough finance to get off the ground and many investors will lend in return for goods, tickets, discounts and other perks.