Raising finance
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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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Raising finance

Raising Finance

AS Business Studies


Aims objectives

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.


Starter

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


Raising finance1

Raising Finance

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


Sources of finance

Sources of Finance


Internal external sources of finance

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.


Internal external sources of finance1

Internal & External Sources of Finance

  • List as many internal and external sources as you can:


Problem with borrowing

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


Personal sources of finance

Personal Sources of Finance

  • Investment from personal sources.

  • Collective memory game.


External sources of finance overdrafts

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.


Overdrafts

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


Venture capitalists

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.


Venture capitalists1

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.


Venture capitalists2

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.


Plenary

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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