Essay
Financial Services to Support Business level 3 P2 UNIT 3
- Institution
- PEARSON (PEARSON)
Explain the sources of initial finance, that need to be taken into account when seeking to establish a new business.
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By: charlielovesfootball • 5 year ago
By: rebecca-distinction • 5 year ago
Thanks for the feedback, feel free to ask any questions thank you
By: sidrit1998 • 6 year ago
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I will be explaining the sources of initial finance, which needs to be taken into account when seekingto establish a new business such as Tin-Drum to ensure a successful start-up, growth expansion.
Family and friends can be a source of finance and they can decide whether to borrow the
entrepreneur or give them the money for free and their decision can depend on how well they
believe the business will succeed or they can borrow the entrepreneur the money because they need
it back or they can give them the money for free depending on how well they know them. The
entrepreneur will need to convince their family and friends about their business in terms of the
success of it and the determination they will put into it. Also borrowing from family and friends has
less risk and it is easier because the entrepreneur knows them and it is less likely for them to get
taken to court if they do not pay it back or they take a long time to pay it back. Also family and
friends is most likely to borrow the money if they just hear of the business idea they may not ask for
much information such as location and family and friends are easier to contact and an appointment
is not needed. Also family and friends may not ask for the money back unless it is a very high
amount.
Banks offer loans, overdraft and credit cards which can be used to start a business such as paying for
equipment and rent. However it is simple to apply for overdraft and credit card because no
information for the business is required unless they want to borrow a very high amount. However to
make a bank loan the bank will require to see a business plan for verification. All of what the bank
offers will need to be paid back by the given date or the entrepreneur could be taken to court. The
bank can offer a loan of £1,000-£1,000,000 and this will be depending on how well they believe the
business will succeed. Business overdraft can be between £500-£25,000 depending on how much is
needed and agreed. Business credit card can be up to £10,000.Bank loan is high risk because if not
paid back they could take the business assets in order to compensate. However bank is a good option
because high loan and finance is available.
The government offers loans and grants which can be used to start-up the business; the grants are
free and loans need to be paid back. Business grants can range from £1,000-£100,000 depending on
the business plan, this is good because it is free and does not have to be paid back and it can be used
additionally with a loan. Loans available is up to £25,000 which must be paid back within a certain
time however the government will need to see the business plan to decide how much they want to
borrow the entrepreneur. The entrepreneur would have to convince the government in order for
them to receive a high amount.
The entrepreneur can also use their saving which could have come from their previous employment
and own savings is good to be used because the entrepreneur will not have to pay it back to anyone
with interest because it is one’s own money. They also would not need to convince anyone expect
themselves that they will be able to make the money back from the success of their business.
Partnership is good because sometimes the partner could have an high amount of money and this is
could because they could take up more expenses and the other partner could pay them back in the
future or make sure more profit goes to them. Also if both partners have money this is better than
borrowing as the will not need to pay it back and they will put in more effort because it is their
money. Also an entrepreneur could have money but not enough; instead of borrowing they could
find a partner for the business which could be their family or friend.
The entrepreneur could find an investor who sees potential in their business to invest and this has
less risk because investors know not all investments go well so they will not ask for their money back
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