From: Samira Abdulgafur
Subject: unit 6 financial forecasting and modelling
Date: 14th march 2012
Describe suitable sources of finance for a micro start-up business
Description of source of funding (P2) | Advantages and Disadvantages for Business (M1) | Bank loans- a loan made by a bank; to be repaid with interest on or before a fixed date | Advantage - A bank loan can be secured quickly; in less than an hour, a qualified borrower can complete a bank loan transaction.
Disadvantage- Some loans carry a prepayment penalty, preventing the borrower from paying the note off early without incurring extra cost.
| Bank overdraft- building society or bank agrees that you can spend a certain amount extra to what you have in your account, but you have to pay it back with interest | Advantage - An overdraft is there when you need it, and costs nothing (apart from possibly a small fee), Maintain cash flow. Disadvantage- Overdrafts carry interest and fees often at much higher rates than loans. This makes them very expensive for long term borrowing. | Investors laying out capital in an enterprise with the expectation of profit. | Advantage - You can save money for your future.
Your money grows at a good rate when compared to the inflation rate. Disadvantage- You may lose money if you choose high risk investment options. | Savings account- account used to save money and also you gain interest while have the account opened | Advantage – Saving can help you for future plans like opening a business. It also allows you to earn money on your savings in the form of interest. Disadvantage- A main disadvantage of savings accounts is, in the case of notice accounts for example that your money is often tied up for a specific period of…