BTEC National in Business
Level 3
Unit 2 Investigating Business Resources
P4 Describe sources of internal and
external finance for a selected business.
This must be applied to a specific business, so
choose one to base your work on now!
TYO 2014
Why do businesses need finance?
1. Start-up capital - new businesses need this
to buy assets etc
2. Cash-flow – firms must have enough ‘cash’
available to fund the day to day running of the
business (pay suppliers, creditors, wages, etc)
3. Growth - Firms may need funds for expansion
4. Unexpected shortfalls - Firms may need
additional money at short notice to cover
unexpected events
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What sources of finance do you know?
TASK:
Make a list of any sources you can think a new
or existing business might use to raise finance.
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Internal Sources of Finance
1. Retained Profits – money re-invested back
into the business, usually to improve/expand it
2. Improve Credit Control - making sure the
people who owe the firm money pay on time
3. Reduce Stock Levels –avoiding tying up cash
unnecessarily by buying too much stock too
soon
4. Sell Fixed Assets – sell off what is no longer
required (turn the asset back into cash)
5. Owner’s own funds – from savings, an
inheritance, or the sale/financing of personal
assets
TYO 2009
Working capital
Specific Purpose
Specific Purpose
Short Term
• Bank Loan
• Leasing
• Hire Purchase
Long Term
• Bank Overdraft
• Trade Credit
• Factoring
Med. Term
External Sources of Finance
• Commercial Mortgage
• Share Issue/Venture Capital
• Grant (from government/other sources)
TYO -2009
2008
TYO
Your presentation should
identify suitable sources for:
•
•
•
•
•
•
Premises
Equipment
Fixtures and fittings
Stock
Advertising (for the opening)
Cash flow needs
The value of each will depend on your chosen business –
discuss your ideas with your teacher first!
TYO 2014
To choose the right source of finance
businesses must consider:
1. Amount needed?
2. For how long (the “term”)?
3. What is the money needed for?
4. How quickly is it needed?
5. How much does the finance cost?
(Rate of interest and any fees)
TYO 2014
http://www.bized.co.uk/educators/16-19/business/accounting/presentation/sourcefinancemap.gif
TYO 2014
Sources of information to get you started
• http://www.bized.co.uk/virtual/bank/business/finan
ce/sources/index.htm
• http://www.bbc.co.uk/schools/gcsebitesize/busines
s/finance/sourcesoffinancerev1.shtml
• http://tutor2u.net/business/gcse/finance_other_ext
ernal_finance.htm
• http://www.berr.gov.uk/whatwedo/enterprise/enter
prisesmes/info-business-owners/access-tofinance/page37736.html
TYO 2014
Additional sources added Nov. 2012
• http://www.philipallan.co.uk/pdfs/txtbusga0
9.pdf
• https://www.acceleratedstudynotes.com/2
012/10/24/3-1-sources-of-finance/
• http://www.tutor2u.net/business/finance/fin
ance_sources_smes.htm
• http://www.bized.co.uk/educators/level2/fin
ance/lesson/sources1.htm
TYO 2014