Finance And Support For A Small Business
Specification:
3.1 Finance and Support for a Small Business • sources of finance • sources and types of advice available to small businesses |
Candidates need to be aware of the difficulties that many new businesses face when attempting to raise funds.
Candidates should be familiar with the main sources of finance available to a small business, including: overdraft, bank loans and mortgages, loans from friends and family, and grants. Candidates should be aware of organisations that can support small businesses. |
Sources of Finance for a New Business
Learning Objectives:
- To understand the sources of finance available to a new business (D-E)
- To analyse the advantages and disadvantages of these different sources (B-C)
- To evaluate for a given business, the best method of obtaining finance (A*-A)
- To understand the sources of finance available to a new business (D-E)
- To analyse the advantages and disadvantages of these different sources (B-C)
- To evaluate for a given business, the best method of obtaining finance (A*-A)
Starter activity: What is the purpose of Dragon's Den? Why do small businesses use them?
Why do businesses need finance?
- Renting or buying a building
- Vehicles
- Advertising
- Equipment and machinery
- Stock
Owner's Funds
- The money put into the business by the owner or owners depending on the type of ownership.
- Advantages - No interest
- Disadvantages - Might not have much money saved up
Bank Loans
- A large sum of money given to the business that is repaid in installments over a few years. There will be interest charged on this loan. New businesses are seen as a risk to banks so interest may be high. Collateral/security may also be asked for by the bank (e.g. entrepreneur's house)
- Advantages - Can obtain large amounts
- Disadvantages - Interest
Mortgages
- Large loans given by banks and building societies for the purchase of land and buildings. They will ask for regular repayments until the money and interest has been repaid.
- Advantages - Large amounts of money can be obtained
- Disadvantages - Interest and security needed
Question: Why would a small business want to take a mortgage out? (Think about the 4Ps and the different places where a business can sell it's products or services)
Overdrafts
- A flexible loan that is only used when required. It gives a business the right to borrow variable amounts up to an agreed limit.
- Advantages - Only pay interest at times you have to
- Disadvantages - Bank may not agree, high interest, bank can withdraw it at short notice
Loans from Friends and Family
- A loan from somebody you know which is easy to arrange and usually has no interest
- Advantages - No interest
- Disadvantages - May not have large funds, may need it back quickly, less likely to scrutinize business plan
Government Grants
- The government encourages people to start businesses as it is good for the economy. This is a sum of money given to a business for a specific reason (e.g. creating jobs in a poor area). It usually has to be matched by the entrepreneur. The EU also offer grants.
- Advantages - No interest and don't have to be repaid
- Disadvantages - Difficult to obtain, have to meet criteria, lots of forms and an interview
Question: Contrast whether it is better idea to borrow a loan from friends and family or a bank. What are the main problems involved in both?
sources_of_finance_worksheet_unit_1.doc | |
File Size: | 1933 kb |
File Type: | doc |
sources_of_finance_worksheet.doc | |
File Size: | 1933 kb |
File Type: | doc |
Plenary:
http://www.businessstudiesonline.co.uk/live/index.php?option=com_content&view=article&id=7&Itemid=12
HW - Create a factsheet where you have researched a bank loan, mortgage, overdraft and government grant.
http://www.businessstudiesonline.co.uk/live/index.php?option=com_content&view=article&id=7&Itemid=12
HW - Create a factsheet where you have researched a bank loan, mortgage, overdraft and government grant.
Sources and Types of Advice for Small Businesses
Learning Objectives:
- To understand the different places businesses can receive financial advice (D-E)
- To analyse the effectiveness of each source of advice (B-C)
- To evaluate the impact of each source of advice for a given business (A*-A)
- To understand the different places businesses can receive financial advice (D-E)
- To analyse the effectiveness of each source of advice (B-C)
- To evaluate the impact of each source of advice for a given business (A*-A)
Starter activity:
sources_of_finance_ladder_words.doc | |
File Size: | 45 kb |
File Type: | doc |
Business Link (Gov.uk)
A website and branch of locations where the government gives information to UK businesses. It helps new and existing businesses to grow and become more efficient and competitive.
A website and branch of locations where the government gives information to UK businesses. It helps new and existing businesses to grow and become more efficient and competitive.
Private Websites
Lots of small privately owned websites give advice to small businesses. smallbusiness.co.uk is an example. It is sponsored by Lloyds TSb and gives lots of financial and other advice.
Lots of small privately owned websites give advice to small businesses. smallbusiness.co.uk is an example. It is sponsored by Lloyds TSb and gives lots of financial and other advice.
Banks
UK banks offer advice and guidance as well as banking services to new businesses. This can inlcude advice on:
UK banks offer advice and guidance as well as banking services to new businesses. This can inlcude advice on:
- business plans
- starting a business
- finding premises
- employing staff
- trading online
Accountants and Solicitors
Professionals can offer help to new businesses. Accountants can support with financial matters and solicitors with legal matters. They will however, expect to be paid.
Professionals can offer help to new businesses. Accountants can support with financial matters and solicitors with legal matters. They will however, expect to be paid.
Activity: Use the computers to create a poster explaining and giving real examples of the type of information and support businesses can receive. On your poster, explain how relevant this information is to a new business.
You will then present these posters to the class.
You will then present these posters to the class.
advice_and_finance_wordsearch.doc | |
File Size: | 103 kb |
File Type: | doc |