They are flexible and are widely used to aid short

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They are flexible and are widely used to aid short term cash flow problems Trade credit - another common source of finance where suppliers supply goods and then allow a period of time before collecting payment
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23 External sources of funds Debt factoring - credit sales for which money has not been paid yet can be sold to a debt factoring company for an immediate cash payment (normally 80% of the amount owing). When the debt becomes due, the debt factoring company will then collect it and make a final payment to the business, keeping a commission (usually around 5%) for themselves 1. Choosing the right sources of capital is a decision that will influence a company for a lifetime. 2. The money is out there; the key is knowing where to look. 3. Raising money takes time and effort. 4. Creativity counts. Entrepreneurs have to be as creative in their searches for capital as they are in developing their business ideas. The “Secrets” to Successful Financing
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24 The “Secrets” to Successful Financing 5. The World Wide Web puts at entrepreneur’s fingertips vast resources of information that can lead to financing. 6. Be thoroughly prepared before approaching lenders and investors. 7. Entrepreneurs should not underestimate the importance of making sure that the “chemistry” among themselves, their companies, and their funding sources is a good one. Summary Ownership Capital In this context, 'owners' refers to those people/institutions who are shareholders. Sole traders and partnerships do not have shareholders - the individual or the partners are the owners of the business but do not hold shares. Shares are units of investment in a limited company, whether it be a public or private limited company. Shares are generally broken down into two categories: Ordinary shares Preference shares Non-Ownership Capital Whilst the following sources of finance are important, they are not classed as Ownership Capital - Debenture holders are not shareholders, nor are banks who lend money or creditors. Only shareholders are owners of the company. Debentures Other loans Overdraft facilities Hire purchase Lines of credit from creditors Grants Venture capital Factoring and invoice discounting: Factoring Invoice discounting Leasing
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