Long-Term and Short-Term Financing Options

The document outlines comprehensive information about various financing options available to businesses, both long-term and short-term. These options are crucial for business operations, expansion, and establishment.

Definition: Share Capital is referred to as Permanent capital and comes in two forms - Ordinary shares (equities) and Preference shares.

Highlight: Limited liability encourages shareholder investment, while no guaranteed dividend payments make it a potentially risky investment.

Example: A business might use share capital to purchase assets that can later serve as collateral for bank loans.

Vocabulary: Loan Capital refers to financing from sources like debentures, mortgages, venture capitalists, business angels, and financial institutions.

The document details several financing methods:

Internal Sources:

• Retained Profit: Unused after-tax profits
• Sale of Assets: Disposing of unnecessary business assets

External Sources:

• Government Assistance: Grants and support packages
• Bank Loans: Fixed-term agreements with set payments
• Leasing: Asset usage without ownership
• Trade Credit: Delayed payment terms for purchased goods
• Factoring: Advanced payment against invoices
• Bank Overdraft: Flexible short-term borrowing

Quote: "Limited liability encourages shareholders to invest" - highlighting a key advantage of share capital financing.