By the best team

Team members:Grace, Dimitry,

Celli, Alan, tiffany
 Outline

• Internal sources
• External sources
• Longterm sources
• Shorterm sources
 Source of
finance

Internal External Long term Short term

source source source source

Non-
Ownership
ownership
capital
capital
 Internal and External
Sources
• Internal Sources of Finance
– Come from trading of business
– Day to day cash from sales to customers
– Money loaned from trade suppliers through
extended credit
– Reductions in amount of stock held by business
– Disposal (sale) of any surplus assets no longer
needed (e.g. selling a company car)
• External finance
– Comes from individuals or organisations who do
not trade directly with business
– E.g. banks, investors. government
Internal sources

Personal Retained
savings profits

Sale of
Working
fixed
capital
assets
 Non-
Ownership
ownership
capital
capital
Short and Long-term Finance
• Short term finance
– Needed to cover day to day running of business
– Paid back in a short period of time, so less risky
for lenders
• Long term finance
– Tends to be spent on large projects which will
pay back over a longer period of time
– More risky so lenders tend to ask for some form
of insurance or security if company is unable to
repay loan.
– A mortgage is an example of secured long-term
finance
• Short term:finance the business
for up to 1 year
• Medium term: finance the business
for up to 5 years
• Long term:finance the business for
more than 5 years
 Share

Asset Debent
sales ure

Ratain Long Ventur

ed term d
profit source capital

Interna Bank
l loan
accura mortag
l age
Owner
capital
 Bank
overdra
ft

Short Short
term
bank term Trade
credit
loans
sources

Credit
card
Internal and external
finance

• Finance can be obtained from

either internal or external
sources
– Internal means it comes from
within the business
– External means it is obtained from
outwith the business
 Reference

http://www.scribd.com/doc/39664871/
Sources-Of-Finance-Ppt-Om