Every business needs money to survive and grow, whether it's... Show more
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STUDYQUEEN๐๐ฉท๐ต๐ธ
10/12/2025
Business
Sources of finance
1 / 5
Internal Sources of Finance
Money doesn't always have to come from outside your business - sometimes the best funding is right under your nose. Internal finance comes from within the company itself, which means no awkward conversations with bank managers or giving up control to investors.
Retained profit is probably the most straightforward option - it's simply the money your business has earned and saved up from previous years instead of paying it all out to shareholders. The beauty is there's no interest to pay and you keep complete control, but it might not be enough for those big expansion plans.
Sometimes businesses need to sell assets like unused machinery or property to raise quick cash. It's fast and debt-free, but you'll lose those assets forever - and you might regret it later if you actually need them.
Owner's capital involves business owners dipping into their personal savings. Whilst this keeps things simple with no repayments or interest, owners are literally putting their own money on the line.
Quick Tip: Internal finance is often the cheapest option, but it's limited by how much the business has actually saved up or owns.
External Sources of Finance - Traditional Options
When internal funds aren't enough, it's time to look outside your business. External finance opens up much bigger possibilities, though it usually comes with strings attached.
Bank loans are the classic choice - you borrow a fixed amount and pay it back over time with interest. They're brilliant for budgeting because you know exactly what you'll pay each month, and they're perfect for big purchases like equipment. The downside? Banks often want collateral as security, and new businesses might struggle to qualify.
An overdraft is like a safety net that lets your business account go negative up to an agreed limit. It's incredibly flexible for covering short-term cash flow hiccups, and you only pay interest on what you actually use. However, interest rates can be steep, and banks can demand repayment at any moment.
Trade credit is essentially buying now and paying later - suppliers let you take goods and settle the bill in 30, 60, or 90 days. This gives your cash flow breathing room, though late payments can damage supplier relationships.
Remember: Traditional external finance often requires good credit history and sometimes collateral, so make sure your business finances are in good shape before applying.
Modern External Finance Options
Today's businesses have access to innovative funding methods that would have seemed impossible just a decade ago. These options often suit different types of companies and situations.
Leasing lets you use expensive equipment without the massive upfront cost - you're essentially renting it long-term. Your cash flow stays healthy, and maintenance is often included, but you'll never actually own the asset and it might cost more over time than buying outright.
Share capital means selling pieces of your company to investors in exchange for cash. Limited companies can raise substantial amounts this way without taking on debt, but you're giving up ownership and control - shareholders will expect dividends and want a say in decisions.
Venture capital involves professional investors who provide large sums in exchange for significant business stakes. They often bring valuable expertise and connections, but they'll want serious influence over your business decisions.
Crowdfunding harnesses the power of the internet to raise small amounts from lots of people. It's brilliant for generating publicity alongside funding, though there's no guarantee you'll hit your target, and managing campaigns takes considerable time and effort.
Think About This: Modern finance options often involve giving up some control or ownership, so consider how much independence you're willing to sacrifice for funding.
Specialised Finance Solutions
Some funding options are designed for very specific business situations or challenges. Understanding these can be crucial when traditional methods don't fit your needs.
Government grants are essentially free money for businesses that meet specific criteria, often related to innovation, sustainability, or job creation. They don't need repaying, which makes them incredibly attractive, but they're notoriously difficult to obtain and often require you to contribute matching funds.
Factoring solves the classic problem of waiting ages for customers to pay their invoices. You sell these unpaid invoices to a factoring company at a discount and get immediate cash. It transforms your cash flow instantly, but you won't receive the full invoice value, and customers might not appreciate being chased by a third party.
These specialised options often work best when combined with other finance sources. They're designed to solve specific problems rather than provide general funding.
The key is matching your funding choice to your actual business needs - there's no point taking a long-term loan for short-term cash flow issues, or using an overdraft to buy expensive machinery.
Pro Tip: Many successful businesses use a combination of finance sources rather than relying on just one - this spreads risk and often reduces overall costs.
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4.9/5
App Store
4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because itโs too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didnโt even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as Iโm sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH ๐๐๐ฒ๐ค๐โจ๐๐ฎ
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because itโs too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didnโt even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as Iโm sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH ๐๐๐ฒ๐ค๐โจ๐๐ฎ
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Understanding Different Sources of Finance
Every business needs money to survive and grow, whether it's to buy equipment, pay staff, or cover daily expenses. Understanding the different ways businesses can get this funding is crucial for making smart financial decisions that keep companies profitable and... Show more
Internal Sources of Finance
Money doesn't always have to come from outside your business - sometimes the best funding is right under your nose. Internal finance comes from within the company itself, which means no awkward conversations with bank managers or giving up control to investors.
Retained profit is probably the most straightforward option - it's simply the money your business has earned and saved up from previous years instead of paying it all out to shareholders. The beauty is there's no interest to pay and you keep complete control, but it might not be enough for those big expansion plans.
Sometimes businesses need to sell assets like unused machinery or property to raise quick cash. It's fast and debt-free, but you'll lose those assets forever - and you might regret it later if you actually need them.
Owner's capital involves business owners dipping into their personal savings. Whilst this keeps things simple with no repayments or interest, owners are literally putting their own money on the line.
Quick Tip: Internal finance is often the cheapest option, but it's limited by how much the business has actually saved up or owns.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
External Sources of Finance - Traditional Options
When internal funds aren't enough, it's time to look outside your business. External finance opens up much bigger possibilities, though it usually comes with strings attached.
Bank loans are the classic choice - you borrow a fixed amount and pay it back over time with interest. They're brilliant for budgeting because you know exactly what you'll pay each month, and they're perfect for big purchases like equipment. The downside? Banks often want collateral as security, and new businesses might struggle to qualify.
An overdraft is like a safety net that lets your business account go negative up to an agreed limit. It's incredibly flexible for covering short-term cash flow hiccups, and you only pay interest on what you actually use. However, interest rates can be steep, and banks can demand repayment at any moment.
Trade credit is essentially buying now and paying later - suppliers let you take goods and settle the bill in 30, 60, or 90 days. This gives your cash flow breathing room, though late payments can damage supplier relationships.
Remember: Traditional external finance often requires good credit history and sometimes collateral, so make sure your business finances are in good shape before applying.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Modern External Finance Options
Today's businesses have access to innovative funding methods that would have seemed impossible just a decade ago. These options often suit different types of companies and situations.
Leasing lets you use expensive equipment without the massive upfront cost - you're essentially renting it long-term. Your cash flow stays healthy, and maintenance is often included, but you'll never actually own the asset and it might cost more over time than buying outright.
Share capital means selling pieces of your company to investors in exchange for cash. Limited companies can raise substantial amounts this way without taking on debt, but you're giving up ownership and control - shareholders will expect dividends and want a say in decisions.
Venture capital involves professional investors who provide large sums in exchange for significant business stakes. They often bring valuable expertise and connections, but they'll want serious influence over your business decisions.
Crowdfunding harnesses the power of the internet to raise small amounts from lots of people. It's brilliant for generating publicity alongside funding, though there's no guarantee you'll hit your target, and managing campaigns takes considerable time and effort.
Think About This: Modern finance options often involve giving up some control or ownership, so consider how much independence you're willing to sacrifice for funding.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Specialised Finance Solutions
Some funding options are designed for very specific business situations or challenges. Understanding these can be crucial when traditional methods don't fit your needs.
Government grants are essentially free money for businesses that meet specific criteria, often related to innovation, sustainability, or job creation. They don't need repaying, which makes them incredibly attractive, but they're notoriously difficult to obtain and often require you to contribute matching funds.
Factoring solves the classic problem of waiting ages for customers to pay their invoices. You sell these unpaid invoices to a factoring company at a discount and get immediate cash. It transforms your cash flow instantly, but you won't receive the full invoice value, and customers might not appreciate being chased by a third party.
These specialised options often work best when combined with other finance sources. They're designed to solve specific problems rather than provide general funding.
The key is matching your funding choice to your actual business needs - there's no point taking a long-term loan for short-term cash flow issues, or using an overdraft to buy expensive machinery.
Pro Tip: Many successful businesses use a combination of finance sources rather than relying on just one - this spreads risk and often reduces overall costs.
Sign up to see the contentIt's free!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
We thought youโd never ask...
What is the Knowunity AI companion?
Our AI Companion is a student-focused AI tool that offers more than just answers. Built on millions of Knowunity resources, it provides relevant information, personalised study plans, quizzes, and content directly in the chat, adapting to your individual learning journey.
Where can I download the Knowunity app?
You can download the app from Google Play Store and Apple App Store.
Is Knowunity really free of charge?
That's right! Enjoy free access to study content, connect with fellow students, and get instant help โ all at your fingertips.
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Can't find what you're looking for? Explore other subjects.
Students love us โ and so will you.
4.9/5
App Store
4.8/5
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because itโs too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didnโt even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as Iโm sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH ๐๐๐ฒ๐ค๐โจ๐๐ฎ
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because itโs too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didnโt even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as Iโm sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH ๐๐๐ฒ๐ค๐โจ๐๐ฎ
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user