SHORT, MEDIUM , LONG-TERM FINANCE

• SHORT- 1-3 years e.g trade credit, overdraft, loan
• MEDIUM- 3-10 years e.g leasing, hire purchase, loan
• LONG- over 10 years e.g loan, share capital, mortgages, venture capital, finance from the EU

Different sources of finance avialable to a business start-up

• LOANS-  longer-term kind of finance, fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of repayments.  good for financing investment in fixed assets  and are generally at a lower rate of interest that a bank overdraft.  However, they don’t provide much flexibility.

• SPONSORSHIP hard to get
• GOVERNMENT GRANDS hard to get 
• PERSONAL SAVINGS e.g redundancy money risky This is a cheap form of finance and it is readily available.   Investing personal savings maximises the control the entrepreneur keeps over the business.  It is also a strong signal of commitment to outside investors or providers of finance.
• RE-MORTGAGING- The way this works is simple.  The entrepreneur takes out a second or larger mortgage on a private property and then invests some or all of this money into the business.  The use of mortgaging like this provides access to relatively low-cost finance, although the risk is that, if the business fails, then the property will be lost too. .
•  INVESTORS may decide to pull out, hard to find 
• DEBENTURES 
• FRIEND/FAMILY e.g inheritance -  This can be quicker and cheaper to arrange (certainly compared with a standard bank loan) and the interest and repayment terms may be more flexible than a bank loan.  However, borrowing in this way can add to the stress faced by an entrepreneur, particularly if the business gets into difficulties.
• SALE OF ASSETS 
• SALE AND LEASEBACK 
• OVERDRAFT-is a more short-term kind of finance. An overdraft is really a loan facility – the bank lets the business “owe it money” when the bank balance goes below zero, in return for charging a high rate of interest. As a result, an overdraft is a flexible source of finance, in the sense that it is only used when needed. Bank overdrafts are excellent for helping a business handle seasonal fluctuations in cash flow or when the business runs into short-term cash flow problems (e.g. a major customer fails to pay on time).

What is the difference between Public and Private sector? what is privatisation? give 1 example of business that has been privatased.

PUBLIC SECTOR - The part of national economy providing basic goods / services that are either not, or cannot be, provided by the private sector. It consists of national and local governments, their agencies.

PRIVATE SECTOR- The part of national economy made up of private enterprises. It includes the personal sector (households) and corporate sector (companies), and is responsible for allocating most of the resources within an economy.

privatisation-Sale or return of publicly owned enterprises to private ownership and control.

e.g ROYAL MAIL

Multinational

An enterprise operating in several countries but managed from one (home) country. Generally, any company or group that derives a quarter of its revenue from operations outside of its home country is considered a multinational corporation.

franchise

• A privilege granted to make or market a good or service under a patented process or trademarked name.
• A business operating under such privilege.

Public and Private Limited Companies

• Each company has its own identify in law
• the company employs staff, not the owners
• the company owns assets not the owner
• the company operates until in formally wound up/ liquidation
• the company pays co-operation tax on its profits

PRIVATE

ADVANTAGES

• limited liability
• minimum of 1 director + 1 shareholder
• easy to set up/ affairs still private
• easier to raise capital/ borrow from bank
• death of shareholder has no effect on company

DISADVANTAGES

•  cannot sell shares to public
• more regulations to comply with
• account procedures may be more costly
• death of shareholder has no effect on company
• share transfers need agreement of all

PUBLIC 

ADVANTAGES

• limited liability
• increased capital as public can buy shares
• min of 2 directors + 2 shareholders
• shares increase in value if company sucessful 
• operating large scale can lower cost per unit

DISADVANTAGES

• many regulations to comply with
• accounts (and problems) are public knowledge
• shareholders may sell shares of dividends porr
• original owner may lose overall control