trade payables) to a a percentage of invoice. factoring company. amount due. Factors only want to Can save time/ buy large value chasing unpaid invoices/large invoices. quantity of invoices. Grants received from Does not need to be Usually has the government/EU/ paid back. conditions attached. enterprise agencies Can take time to get for a specific purpose. as requires many forms to be completed. Medium Term Sources of Finance SOURCE DESCRIPTION ADVANTAGES DISADVANTAGES Loan from Borrowing money No interest to pay Arguments over family and from family and back. Flexibility in borrowed money may friends (ST friends which is repayment of loan. occur. & Ptshp) repaid over a period of time. Bank loan Borrowing money Repaid in fixed Interest is paid back from a bank (for a instalments. on top of equity specific purpose) borrowed. Helps organisation to which is repaid over a budget and plan. Interest rate may be period of time. high for new/high risk businesses. Hire Deposit paid for item Can receive item Interest could make Purchase and the rest paid for immediately without the item expensive. in instalments. paying in full. Item is not owned until all payments Cost of item is spread made. may make it more affordable. Item is by organisation after final instalment is paid. Leasing Renting vehicles or Cheaper than Expensive in the long equipment for a purchasing outright in term as organisation period of time. the short term. is continually paying leasing charge. Equipment is replaced when outdated. Organisation will never own the asset. May include a service
trade payables) to a factoring company. a percentage of amount due. Can save time/ chasing unpaid invoices. invoice. Factors only want to buy large value invoices/large quantity of invoices. Grants received from the government/EU/ enterprise agencies for a specific purpose. Does not need to be paid back. Usually has conditions attached. Can take time to get as requires many forms to be completed. Medium Term Sources of Finance SOURCE DESCRIPTION ADVANTAGES DISADVANTAGES Loan from family and friends (ST & Ptshp) Borrowing money from family and friends which is repaid over a period of time. No interest to pay back. Flexibility in repayment of loan. Arguments over borrowed money may occur. Bank loan Borrowing money from a bank (for a specific purpose) which is repaid over a period of time. Repaid in fixed instalments. Helps organisation to budget and plan. Interest is paid back on top of equity borrowed. Interest rate may be high for new/high risk businesses. Hire Purchase Deposit paid for item and the rest paid for in instalments. Can receive item immediately without paying in full. Cost of item is spread may make it more affordable. Item is by organisation after final instalment is paid. Interest could make the item expensive. Item is not owned until all payments made. Leasing Renting vehicles or equipment for a period of time. Cheaper than purchasing outright in the short term. Equipment is replaced when outdated. May include a service Expensive in the long term as organisation is continually paying leasing charge. Organisation will never own the asset.
Notes-for-People-and-Finance.docx