Professional Documents
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Report
WK10 - Sources of Funding
Workshop 3
Wednesday 4th March 2015
Resour
ces
availab
le
Marketi
ng
Strateg
y
Operatio
ns plan
Risk &
strate
gic
option
s
Financial plan
Resour
ces
needed
Equity
Long
and
medium
term
Fixed assets
Permanent working
capital
Short
term
Use of finance
Bank overdraft
Short term loans
Personal, family and friends
Bank
Stock
Debtors (net creditors)
Seasonal fluctuations
in working capital
Stock
Debtors (net creditors)
Term Loans:
Personal, Family and Friends
Advantages
Disadvantages
Security unlikely to be
required
Loans may be
informal capital
repaid as and when
cash flow improves
Interest payments may
not be required or may
be deferred
Bank Overdraft
Advantages
Flexible once agreed,
available on demand
Can be cheap if you dip
into and out of it you
only pay interest when
you use it
Good solution to shortterm financing needs
Disadvantages
Repayable on demand
Interest rate is variable
Can be expensive if in
permanent overdraft as
interest rate is usually
higher than on term
loans
Usually secured against
business assets and
can be refused because
of lack of security
Personal guarantee may
then be required
Term Loans:
Banks and Crowdfunding
Advantages
Disadvantages
Usually secured
against business or
personal assets
Can be refused
because of lack of
security
Requires good cash
flow to pay interest and
repay capital
Crowdfunding website
charge fee based on
funds raised
70%
Long leasehold
60%
Specialist plant
and machinery
510%
Non-specialist
plant & machinery
30%
Debtors
Stock
25%
Banks Considerations
Lease Finance
Advantages
Guarantees not
required security is
on assets purchased
Disadvantages
Expensive compared
to rates of interest
charged on loans
Requires adequate
cash flow to meet
regular payments
Equity Finance:
Personal, Family and Friends
Advantages
Disadvantages
Exit Opportunities
Buy-back
Trade sale
Management buy-out
Management buy-in
Second-stage finance
Stock market floatation
Crowdfunding Equity
Advantages
Disadvantages
Angel Finance
Advantages
Disadvantages
Venture Finance
Advantages
Disadvantages