Cambridge IGCSE Business (0264) syllabus reference: 5.1.1 and 5.1.2
Why finance is needed: start-up capital, expansion, replacing non-current assets, investing in new technology, and working capital.
| Source | Advantages | Disadvantages |
|---|---|---|
| Owners' investment | No interest; no repayment | Limited amount; owner's savings at risk |
| Retained profit | No interest; no loss of control | May not be enough; less for dividends |
| Sale of unwanted assets | Turns unused assets into cash | Takes time; assets may sell for little |
| Working capital (reduce inventory) | Frees cash quickly | Risk of running out of inventory |
| Source | Key points |
|---|---|
| Share capital | Large sums; no interest; but loss of control and dividends expected (limited companies only) |
| Venture capital | Investment in risky new businesses in return for shares and influence |
| Bank loan | Fixed repayments plus interest; security often needed |
| Bank overdraft | Flexible short-term borrowing; high interest; can be withdrawn |
| Leasing | Use an asset in return for regular payments; never owned |
| Hire purchase | Deposit then instalments; asset owned after the last payment |
| Trade credit | Suppliers allow time to pay; free short-term finance |
| Government grants | No repayment; conditions attached; limited availability |
| Crowdfunding | Many people invest small amounts online; publicity, but target may not be reached |