Cherri bakewell is expanding her business and wants to open up a coffee shop in the premises next to her bakery. For her to open a business she needs to get a bank loan out.
All she needs to do is borrow money from the bank and then repay them over an agreed length of time. She could also use this loan on other business users such as a car. This is an external finance and an advantage of this use is that they give you how much you need and it easy for you to start a business. Also if you don't have enough money then this type of finance is very good. But it also has a downfall which is if you don't pay them back and your business isn't successful and you don't have enough money to pay them back then you will be in debt. You may get bankrupt which may lead you to loose everything. Another downfall is that some people borrow too much and get trapped by debt. You could obtain a bank loan through online or you could go to the bank and apply through there. Another advantage is if your business goes successful and your have profit savings then you would be able to pay the bank back in an agreed length of time.
She may need to take a mortgage out for her premises which is a legal agreement by which a bank, building society etc lends her money at an interest in exchange for taking title of the property. An advantage of this is that it makes home ownership affordable for her to buy the property. Also it is easy for her if she does not have enough money. If she does repayment mortgage then she could get all her money back in a few years. But like for every advantage it also has its downfalls which is she will pay back a lot more than she borrowed. She has to keep up with the mortgage repayments or she could loose the property which would lead to carrying an enormous
debt for a long time. It is an internal finance and you could apply for a mortgage through online or even through the bank.
It is important for every business to have a budgeting and controlling costs within the business. If businesses do not monitor costs and budgets then they might face
