External sources of finance

1. Overdraft

1.1. Allow to take more money than a person has on the account

1.2. It has interests on the amount given

2. Trade Credit

2.1. Agreement that let the buyer to pay seller later

2.2. Exist a period of 30-90 days

2.3. Business have cash flow by the delaying payment

3. Grants

3.1. Funds given by the government

3.2. It must exist a plan of money’s utilities

3.3. Come with strings attached

4. Debt factoring

4.1. Sell invoice to external party

4.2. Factor has responsibility for collect external debts owned by business

4.3. Debt will be paid of 80% of money invoiced

4.4. Immediate cash for the business but it will lose a percentage

5. Venture Capital

5.1. A company that invest on small business

5.2. Own stake in business

5.3. Provide guidance

5.4. May set high profit targets

6. Share capital

6.1. Equity capital

6.2. Shares are sold on stock exchange

6.3. No interests

6.4. Shareholders expect dividends

7. Loan Capital

7.1. Money sourced from institutions as banks

7.2. Interest can be fixed or variable

7.3. Owners have full control

7.4. Terms of interests would be a burden

8. Subsidies

8.1. Cash given by the government to support public interest.

8.2. Subvention

8.3. Help to increase demands for lower prices

9. Leasing

9.1. Contract to use particular assets

9.2. Not need a high initial capital for asset

9.3. May be more expensive than direct one

10. Business Angels

10.1. People that provide capital to entrepreneurs with their benefits

10.2. Invest their experience and capital

10.3. They will have a percentage from the business because of the risks