Business – 5.2 Sources of finance – Internal and external sources | e-Consult
5.2 Sources of finance – Internal and external sources (1 questions)
Login to see all questions.
Click on a question to view the answer
Answer:
| Source | Amount Typically Available | Control Implications | Cost (Interest/Fees) | Repayment Terms |
|---|---|---|---|---|
| Bank Loan | £10,000‑£500,000 | No ownership dilution | 5‑12% APR, plus arrangement fees | Fixed monthly repayments over 1‑5 years |
| Micro‑Finance | £1,000‑£50,000 | No ownership dilution | Higher rates (12‑20% APR) plus service fees | Short‑term (6‑24 months) with flexible repayment |
| Crowd Funding | £5,000‑£100,000 | Typically no equity if reward‑based; equity‑based may dilute | Platform fees 5‑8%; no interest if reward‑based | Funds released once target met; no repayment if reward‑based |
Considering the need for £50,000, short‑term cash flow and the desire to retain full ownership, a reward‑based crowd funding campaign is the most appropriate. It provides the required amount without interest costs or equity dilution, and repayment is not required. If the business prefers a guaranteed sum and can meet stricter credit criteria, a bank loan would be the next best choice, though it introduces interest obligations.