External Finance
External sources – From outside the business
External Sources of Finance – Long Term Share Capital
- Limited companies can issue shares
- Shareholders receive dividends
- Shares can be
- – Preference shares – fixed % dividend
- – Ordinary shares – risk capital / equity
Loan Capital
- Providers of loans = creditors
- Four main types of loan capital:
- – Debentures – long term loan to the business at an agreed fixed % of interest repayable on a stated date. Up to 25 years.
- – Mortgages – used to purchase property. Up to 25 years Long term loans – provided by specialist organisations
- – Government assistance – selective and takes form of grants generally
External Sources of Finance – Medium Term
- Bank loans
- Leasing
- Hire purchase
External Sources of Finance – Short Term
- Bank overdrafts – agreed limit, stated time period
- Trade credit – suppliers allow time period before money is due
- Debt factoring – business receives immediate payment for credit sales