Advantages and disadvantages of sources of finance for expansion.

Advantages and Advantages and disadvantages of sources disadvantages of sources of finance for expansionof finance for expansion

Trade CreditTrade Credit

AdvantagesAdvantages

• Helps cash flow Helps cash flow situationsituation

• Pay creditors at a Pay creditors at a later stage allowing later stage allowing goods to be soldgoods to be sold

DisadvantagesDisadvantages

• If company has If company has poor credit historypoor credit history

Sale of AssetsSale of Assets


• If property it may If property it may have appreciatedhave appreciated


• Depreciation – Depreciation – value has value has decreased decreased therefore not worth therefore not worth as much as when as much as when the company the company bought itbought it

Hire PurchaseHire Purchase


• Quick and easy to Quick and easy to raise financeraise finance

• No securityNo security

• Will eventually own Will eventually own it and will become it and will become an assetan asset


• Not owned until Not owned until item is fully paid item is fully paid forfor

• Interest chargedInterest charged

Credit cardsCredit cards


• Easy way to pay for Easy way to pay for goodsgoods

• Can aid cash flowCan aid cash flow


• Not a way a Not a way a business would use business would use if considering if considering expansionexpansion

• High interest High interest chargedcharged

Share issues Share issues


• Share of the profitsShare of the profits

• Part ownership of Part ownership of the businessthe business

• Have a vote (only Have a vote (only ordinary)ordinary)

• Raise a lot of cashRaise a lot of cash


• Profits sharedProfits shared

• Ownership and Ownership and control – who has control – who has it?it?

Debt factoringDebt factoring


• Ease cash flow Ease cash flow problemsproblems


• High interestHigh interest

• Risk of lower value Risk of lower value of sales of sales

Venture CapitalVenture Capital


• Raise large Raise large amounts of Capitalamounts of Capital

• Good way for Good way for expansion if you expansion if you have a good have a good product/ideaproduct/idea


• Venture capitalist Venture capitalist own part of the own part of the businessbusiness

• Will sell off once Will sell off once money is made money is made meaning other meaning other sources of finance for sources of finance for expansion will need expansion will need to be looked atto be looked at

Loan/overdraftLoan/overdraft


• Quick way to raise Quick way to raise cashcash

• Eases cash flow Eases cash flow problemsproblems

• FlexibleFlexible

• Short-termShort-term


• Interest Interest

Government assistance – Government assistance – (grants)(grants)


• Usually freeUsually free

• Can be large Can be large amountsamounts


• Certain criteria to Certain criteria to be awarded one be awarded one e.g. areas of high e.g. areas of high unemploymentunemployment

• Application can be Application can be difficultdifficult

Advantages and disadvantages of sources of finance for expansion.

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