provided for a short interest payments. can be high. time. Long-term sources of finance Source Advantages Disadvantages Increasing the capital in the The amount raised does Profits may have to be shared business not need to be repaid out amongst more people. and interest is not Businesses may not be able applicable. sell enough new shares to raise the money required. Long term bank loan This will allow the Monthly payments must be A bank loan may be taken out business to purchase made on time. The interest and repaid over a number of necessary items eg charged can be high which years. equipment or machinery would increase the overall which will help them to cost of purchasing equipment generate profit. and machinery. Budgeting and planning The amount borrowed has to is easier as repayments be repaid with interest. This are made in regular type of finance may have to fixed installments. be repaid over a long period of time. Mortgage - The business is given a Interest has to be paid each A method of financing land long period of time month. If the business falls and premises. This is a long (approximately 25 behind with repayments, the term loan which is secured years) to repay the lender can claim ownership of against the property or land. mortgage. the property or land.
provided for a short time. interest payments. can be high. Long-term sources of finance Source Advantages Disadvantages Increasing the capital in the business The amount raised does not need to be repaid and interest is not applicable. Profits may have to be shared out amongst more people. Businesses may not be able sell enough new shares to raise the money required. Long term bank loan A bank loan may be taken out and repaid over a number of years. This will allow the business to purchase necessary items eg equipment or machinery which will help them to generate profit. Budgeting and planning is easier as repayments are made in regular fixed installments. Monthly payments must be made on time. The interest charged can be high which would increase the overall cost of purchasing equipment and machinery. The amount borrowed has to be repaid with interest. This type of finance may have to be repaid over a long period of time. Mortgage - A method of financing land and premises. This is a long term loan which is secured against the property or land. The business is given a long period of time (approximately 25 years) to repay the mortgage. Interest has to be paid each month. If the business falls behind with repayments, the lender can claim ownership of the property or land.
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