Advantages and disadvantages of sources of finance for expansion Ammad Awan Glasgow
Trade Credit
Advantages Disadvantages • Helps cash flow • If company has poor situation credit history • Pay creditors at a later stage allowing goods to be sold
Sale of Assets
Advantages • If property it may have appreciated
Disadvantages • Depreciation – value has decreased therefore not worth as much as when the company bought it
Hire Purchase
Advantages • Quick and easy to raise finance • No security • Will eventually own it and will become an asset
Disadvantages • Not owned until item is fully paid for • Interest charged
Credit cards
Advantages • Easy way to pay for goods • Can aid cash flow
Disadvantages • Not a way a business would use if considering expansion • High interest charged
Share issues
Advantages • Share of the profits • Part ownership of the business • Have a vote (only ordinary) • Raise a lot of cash
Disadvantages • Profits shared • Ownership and control – who has it?
Debt factoring
Advantages • Ease cash flow problems
Disadvantages • High interest • Risk of lower value of sales
Venture Capital
Disadvantages Advantages • Raise large amounts of • Venture capitalist own part of the business Capital • Will sell off once • Good way for money is made expansion if you have meaning other sources a good product/idea of finance for expansion will need to be looked at
Loan/overdraft
Advantages • Quick way to raise cash • Eases cash flow problems • Flexible • Short-term
Disadvantages • Interest
Government assistance – (grants)
Advantages • Usually free • Can be large amounts
Disadvantages • Certain criteria to be awarded one e.g. areas of high unemployment • Application can be difficult
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