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Raising Finance

Raising Finance. AS Business Studies. Aims & Objectives. Aim: Understand methods of raising finance. Objectives: D efine overdrafts and venture capitalist Explain different internal and external methods of raising finance Analyse internal and external methods of raising finance. Starter.

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Raising Finance

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  1. Raising Finance AS Business Studies

  2. Aims & Objectives Aim: • Understand methods of raising finance. Objectives: • Define overdrafts and venture capitalist • Explain different internal and external methods of raising finance • Analyse internal and external methods of raising finance.

  3. Starter • Write a type of legal structure/business on your post it note. • Attach to your partners head, without them seeing. • Your partner has to ask questions related to different legal structures/business to find out which one they are. • You cannot ask questions using any of the legal structure key words. Sole Trader Window Cleaner

  4. Raising Finance • On your white boards, list as many different sources of finance for a start up business as you can.

  5. Sources of Finance

  6. Internal & External Sources of Finance Internal Sources of Finance: • Ones which come from the owners of the business. External Sources of Finance: • Ones which come from outside the business.

  7. Internal & External Sources of Finance • List as many internal and external sources as you can:

  8. Problem With Borrowing • Interest Rate. • % of total borrowed money that is paid back by the entrepreneur. • £10,000 loan • 5% interest rate • £500 repaid in interest

  9. Personal Sources of Finance • Investment from personal sources. • Collective memory game.

  10. External Sources of Finance - Overdrafts • A temporary agreement which allows the business to draw out more money than is in its bank account, up to an agreed amount. • Bank charges fees for using, and interest. • Banks can withdraw at any time. Brainstorm in groups, the advantages/disadvantages of using an overdraft.

  11. Overdrafts Advantages Disadvantages Expensive if used for long term raising of finance – due to interest rates. Fees for going over the overdraft limit are high Overdraft can be removed at short notice Non sustainable source of finance. • It is a flexible source of finance • Can be used regularly • It is quick and easy to arrange • Good for short term raising of finance

  12. Venture Capitalists • A professional investor usually another business, interested in high risk, high growth businesses, who will invest an amount into a business in return for shares, and returns.

  13. Venture Capitalists • http://www.youtube.com/watch?v=0uX0DWjyGOE 18.23 • Decide in your groups on the advantages and disadvantages of using a venture capitalist to raise finance.

  14. Venture Capitalists Advantages Disadvantages Loss of part of the ownership of the firm. Loss of full decision making. Loss of profits to venture capitalist. • Large cash sums can be raised quickly. • Gain expertise of the venture capitalist. • Venture capitalist can bring new ideas and perspectives. • Could lead to higher profits in the long run.

  15. Plenary • What is the difference between a loan and an overdraft? • Define venture capitalist. • Give two advantages of using a venture capitalist to raise finance. • Give two disadvantages of using a venture capitalist to raise finance.

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