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How Do I Finance My
How Do I Finance My Business
| Term | Definition |
|---|---|
| Start up capital | Capital needed by an entrepreneur to set up a business |
| Capital expenditure | Involves the purchase of assets that are expected to last more than one year, such as building and machinery |
| Revenue expenditure | Is spending all costs and assets other then fixed assets and includes wages and salaries and materials bought for stock |
| Liquidity | The ability of a firm to be able to pay its short-term debts |
| Liquidation | When a firm ceased trading and its assets are sold for cash to pay suppliers and other creditors |
| Overdraft | Bank agrees to a business borrowing up to an agreed limit as and when required |
| Factoring | Selling of claims over debtors to a debt factor in exchange for immediate liquidity-only a proportion of the value of the debts will be received as cash |
| Leasing | Obtaining the use of equipment or vehicles and paying a rental or leasing charge over a fixed period. This avoids the need for business to raise long-term capital to but the asset. Ownership remains with the leasing company |
| Hire purchase | An asset is sold to a company that agrees to pay a fixed repayments over an agreed time period-the asset belongs to the company |
| Long-term loans | Loans that do not have to be repaid for at least one year |
| Equity finance | Permanent finance raised by companies through the sale of shares |
| Rights issue | Existing shareholders are given the right to buy additional shares at a discounted price |
| Venture capital | Risk capital invested in businesses that have a good profit potential but do not find it easily to gain finance from other sources |
| Business plan | A detailed document giving evidence about a new or existing business, and aims to convince external lenders and investors to extend a finance to the business |
| Working capital | The capital needed to pay for raw materials, day to day running costs and credit offered to customers. In accounting terms working capital = current assets - current liabilities |
Created by:
rudolph.beukes
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