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A financial institution authorised by a government to provide financial services to its customers e.g. accepting deposits

Benefits:
- services are helpful to both new and established businesses
- Flexibility, only need to worry about making regular instalment payments on time and not like overdrafts which you pay back instantly
- No limit on the size of the loan

Drawbacks:
- Usually require collateral as a form of security
- must make periodic payments and if you fall behind, there's risk of having your asset seized
- Banks with variable interest rates because of market conditions or internal conditions, the rates can change meaning it's hard to determine the exact amount of future payments

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Venture capitalists look to invest large sums of money in return for a share of the company, operating through a high risk for high reward scenario.

Benefits:
- Investors will support and manage the company through knowledge and experience
-Will raise substantial amounts from specialist investors
- Unlike banks, venture capitalists are easily attracted to high risk businesses (start-up businesses)

Drawbacks:
-Investors will only invest for a high rate of return
-Short - medium term investors will aim to sell their investment after around 5 years
-Business owners lose control of the business if their stake is over 50%

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a popular method of financing, it is an alternative to buying the asset outright. e.g equipment like machinery

advantages
+ there is no capital outlay so it can be a big help to cash flow
+avoids large chunks of cash outflow
+have access to higher standard

disadvantage
-long term it is more expensive
-if a business leases equipment they are not the owner of it
-when your involved with leasing you are tied into a conract

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Profits earned by the business that are kept and potentially reinvested.

Benefits:
- low cost
- the owners are in charge of how they are used
- does not involve debt

Drawbacks:
- A start-up business needs to reach break-even point before profits can be earned
- The level of retained profits may not be large enough to meet their financial needs
- Waiting for retained profit to accumulate can mean losing potentially profitable business opportunities

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Individuals can borrow money from unrelated individuals

Benefits
-No intermediary required (a middle man)
-Easily accessible to borrow money, as it is online
-Short term, instant cash

Drawbacks
-Large sums of money are not available
-No insurance, no form of protection to the investors.
-Money might not get paid back (Credit Risk)

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a sum of money given to an individual or business for a specific project or person

+
they don't have to repay the grant

they're readily available from a variety of different sources

a good way of building the organisations credibility

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Money invested in a company by the shareholders.
Advantages
-Shareholders have the protection offered by limited liability. Only liable for the amount they invest. -Is a long-term source of finance. -can be very flexible, as business has control of sale and initial amount.
Disadvantages
-Less control of the company. Have right to vote on business deals. -If company goes bankrupt shareholders expect higher rate of return.

-Even though can sell shares after first sale loses value of shares and can anger existing shareholders.

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1. Advantages. - They often offer their own skills, experience and contacts.

-  Due to there only being one investor, there is no conflict between all of the voices.
- There is a low interest on money invested.
2. Disadvantages - It takes a long time to find a specific angel who is willing to invest.
- If the business isn't successful, the angel's would withdraw the money you have already spent.
- The angels might not be able to invest as much as you want.
Ben xx

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flexible only have to borrow what you need
easy short term finance solution

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high rates of interest on the money
only pay interest on anything below £0
can't be used for large amounts of borrowing

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1Benefits
- A loan from friends and family usually has lower interest rates
-Easy and flexible
-Family members or friends are likely to agree on the loan

2 Drawbacks
-can cause issues between family members and they can fall out if the money is not payed back
- The family member loaning the money may feel they have authority in the business
- people usually think that loaning money from friends and family as an informal transaction however this lack of clarity .

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Please write your Benefits and Drawbacks of each of your sources of finance on the padlet below. It then needs to be copied up onto your table.