Describe Sources of Internal and External Finance for a Selected Business, Unit 2 P4
For a business to run successfully on a daily basis it needs finances. Success comes when a business expands, reinvests and uses human recourses to run. Bentalls need money to run their business effectively and successfully. It needs finance for its daily running of the business for example, paying staff wages, paying bills for electricity and rent, paying taxes on time and ordering stock regularly. For a long term goal, Bentalls would need the finance to expand their business, franchise, buy new equipment and or buy new buildings around the current building to expand the area and possible generate more sales with new renting for high street retailers. Bentalls can …show more content…
Share issues occurs when a business sells its shares to its employees in order tom generate more finance however the business are losing control and power at the same time. Bentalls is a private limited company and so it can sell its shares to employees. The share may not be large but a small percentage. This way Bentalls also know that the shareholders are trusted because they are already working for them and not outsides that may change many decisions for them.
Venture Capital is very similar to Share issues but shares are not sold to employees but some individuals who get together to provide finance for existing businesses as well as new, in return of share percentages. They do this because they hope at some point the business will grow and expand and generate enough profit to gain back their investment.
External sources: External sources of finance are funds that are obtained by a business from an individual or organisation. This involves the business repaying the creditor over a long or short period of time depending on the terms of agreement established by both parties. Bentalls are likely to borrow funds from external sources because larger amounts can be