Debt Finance
Borrowing money from a bank which must be repaid with interest
Equity Finance
Selling shares in the business to raise finance rather than borrowing
Internal Sources of Finance
Finance sourced from inside the business, for example, owner’s funds, sale of assets and retained profit
Loan
Bank lends a fixed amount for an agreed time period, which must be repaid with interest
Long term finance
Finance required for periods usually longer than one year
Micro Finance
Lending small amounts of finance small business people to those who can’t access finance from another source
Overdraft
Banks allow businesses to take additional money out of their account up to a certain limit
Owners savings
Using owners’ own savings to finance the business
Sale of assets
Selling equipment /machinery/inventory to raise finance for a business
Short-term Finance
Finance required for short periods usually less than one year
Start Up Capital
Money required to set up a business and keep the business operating until the business breaks even
Trade Credit
Delaying payment to suppliers for an agreed time period
Cash flow
Cash flow in and out of the business over a period of time
Cash flow forecast
Estimate of future cash inflows and outflows usually calculated month by month to ensure there is enough cash to pay short-term debts
Cash Inflow
Cash going into a business
Cash outflow
Cash going out of the business
Crowd Funding
Raising finance by raising small amounts of money from many people, usually via the Internet
Net cash flow
Cash inflows - cash outflows
Trade receivables
Sales made by a business, but still awaiting payment (current asset)
Working Capital
Capital available to a business day to day to pay short-term debts (Current Assets – current liabilities)
Profit
Sales revenue minus total costs of making a product/service
Retained Profit
Reinvesting profits back into the business
Account Payable
Unpaid bills or payment owed by a business which must be paid (current liability)
Assets
Items of value owned by the business like buildings, vehicles, equipment, machinery
Capital Employed
Money invested in a business (buildings, machinery)
Current Assets
Items of value that the business won’t keep for longer than a year, like cash or inventory
Liabilities
Debts owed by the business, for example, bank loans
Non current assets
Items of value the business will keep longer than one year, for example land, buildings, equipment and vehicles
Non-current liabilities
Debts which will last longer than one year, like a long-term loan for new production machinery