Sources of Finance

Think-pair-share

• Why do businesses need finance?
• In what circumstances would businesses need finance for a short time? a long time?
• What are some of the different sources of finance available to firms?

Why do businesses need finance?

• Starting up
• Expanding an existing business
• Increasing working capital (the finance required to pay the day-to-day expenses)

Businesses need finance to pay for either capital expenditure or revenue expenditure... what?

Untitled Slide

• Capital expenditure = money spent on fixed assets (items that will last longer than a year)
• Revenue expenditure = expenses which do not involve purchase of a fixed asset, i.e. the daily expenses such as wages, rent

In what circumstances would businesses need finance for a short time? a long time?

Untitled Slide

• Short-term finance - provides working capital for daily operations
• Long-term finance - finance available for more than a year (sometimes many years)

What is the difference between internal finance and external finance?

Internal finance is obtained from within the business itself

External finance is obtained from outside the business