Internal sources of finance are ones which come from owners of the business.
EX:Owner’s personal funds
income from a sale of the company assets
AD:
No cost to using this money
Doesn`t worry about the money being withdrawn.
No risk of interference in decision making by a lender
Doesn`t have to pay anything from profit which they don`t want to pay
Borrowing from friends or family rarely means interest has to be paid
Friends and family may be more willing to lend
DA:
Have limited finance to start, limited which business can purchase
New business has risk. Entrepreneur could lose everything
If business doesn`t run well, may have argument
External sources of finance are ones which come from outside of the business
EX:overdraft
loan
share capital
overdraft:
AD:
- it`s flexible source of finance,you can use when it is needed
- quick and easy to arrange
DA:
- expensive if used for a long term or large amount
- business has to have bank account
loan:
AD:
- interest is fixed for the period of the loan
- loan is guaranteed for the period
- don`t need to give the lender a proportion of the profits earned by the business
DA:
- interest is paid whether company earn
- business is paying for something it no long needed
