FINANCIAL RESOURCES

Financial Resources

Q 1.1

Identify and describe at least six sources of finance that are available to businesses in the UK.

Guidelines: (Approx. 150 words

In order to complete the above task, your answer should include the following:

Identify six sources of finance and provide a brief description of each source identified

In answering this question, you will have covered the following assessment criterion:

1.1 Identify the sources of finance available to a business.

Sources

Description

Bank Loan

Today, in the UK there are all about seventy types of loaner. The major loaners in U.K. are Benco Santander, Barclays, HSBC, Nationwide and Banking group. High street banks and building societies, online banks, supermarkets, post offices and shops are few places where we can get loans in the UK.

Government Grant Finance

A financial award which are given by state and federal to an eligible grantee. It does not include the technical assistance, revenue sharing and interest rate subsidy. Most recipients are required in government grant finance which provides reports on their grant's progress reports.

Debt Factoring

It is also known as accounts receivable financing which refers to selling of business unpaid invoices to the external entity. Recourse and non-recourse agreements are the two basic types of factoring arrangement.

Share Capital

The share capital in UK companies is established at the time of incorporation. In the case of requirements of more shares, share capital can be increased by the way of resolution.

Bank Overdraft

There is also the facility of overdraft from the banks in UK which varies from banks to banks. The general mean of bank overdraft is to cover short term financing requirements. It depends on the cash flows of the business, seasonal trends and so on.

Own Capital

It can be defines as the owners of business which provides: preference shares, ordinary preference shares, cumulative preference shares, founder shares and bonus shares. All these have preference over the equity shares.

Source: (Pour, 2011, pp. 6-7)

Q.1.2

Assess the implications and costs (if any) of the identified sources of finance available to UK businesses.

Guidelines:(Approx. 150 words)

In order to complete the above task, your answer should:

Assess the effects of these sources of finance on control of the business.

In answering this question, you will have covered the following assessment criterion:

1.2 Assess the implications of different sources of finance.

Write your answer here

Source

Implications.

Bank Loan

Bank loan provide a more long term method of finance with fixed interest rates, some loans may require some kind of security.

Own Capital

This is when one uses their own money to invest in the business start-up; this source of finances is mainly used by sole trader.

Debt Factoring

One of the disadvantages of factoring is that it can be an expensive method of obtaining financing. Selling account receivables at a discount could impact on the business capital.

External influence on your business from the factor. This will however depend with the contract or agreement you enter into and whether it allows the factor to change business practices.

The handling of customers by the factor especially those who delay payments could ...