An Analysis of Key Sources of Finance for Business Growth

This report provides an in-depth analysis of various sources of finance available to businesses, focusing on their benefits and drawbacks. It covers key options such as bank loans, overdrafts, crowdfunding, peer-to-peer lending, angel funding, and venture finance. The report details the advantages of bank loans, including their cost-effectiveness and tax benefits, while also highlighting the repayment burden and security requirements. Overdrafts are presented as a flexible source of immediate funds, although they can be difficult for new businesses to obtain. The report also explores alternative funding methods like crowdfunding and peer-to-peer lending, emphasizing their ease of access and promotional opportunities. Angel funding is recognized for providing capital and professional advice, while venture finance is examined as a formal source of funding for startups. The report concludes by emphasizing the importance of carefully analyzing all funding options, particularly for startups, before making financial decisions.

Sources of finance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
LO 2. Assessing key sources of finance......................................................................................1
CONLCUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Sources of finance for growth in business are vitally important for managers and
entrepreneurs to analyse before they access to any fund methods which will not only enable to
analyse how will be the development of business in company will go in, but also develop
stronger synergy of operations. Report brings forward explanation of various sources of finance
available for company to analyse and also what benefits, drawbacks come along.
MAIN BODY
LO 2. Assessing key sources of finance.
1. Bank loan
A bank loan is referred to as the money which is given to the other party in exchange for the
payment for the loan principal with interest amount. It is a specific sum of amount which has
been borrowed for the specific set of period which is to be repaid within stipulated time with
principal amount and interest amount.
Benefits of Bank loan
The key advantage of the bank who is that allows all individual to repay the loan amount as per
their own convenience by paying regular instalment (Bellavitis, and et.al., 2017). Bank loan is
considered to be one of the most significant source of financing for the business.
The bank is the cost-effective approach and helps in profit retention. The bank loan in turn tends
to have low degree of interest rate.
It is significant in carrying out the business operations by not selling out any equity. It is also
Highly significant because it focuses on providing various set of tax benefits to the individual in
the interest which has been paid upon the bank loan.
Drawback of Bank loan
Repayment burden is one of the key disadvantages associated with the bank loan. The loan
borrowers is to make periodic payment to the bank. Non-repayment of bank loan eventually
results in seizing of the assets and property of the individual person.
The key significant disadvantage associated with the blah Bangalore is that security has to be
given to the bank. However, the bank in turn becomes a secured creditor by securing collateral
over the assets of the business.
The bank tends to prescribe very strict in repayment schedule for the loan borrowers. The failure
of repayment of loan results in reduction in the credit score and also future credibility of the loan
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borrower. However, the stringent repayment schedule tends to result in creating burden on the
loan borrower.
2. Overdraft
It is a deficit within the bank account which has been significantly caused by accessing or
drawing more money than the account actually holds.
Benefits of Overdraft
It is significant in giving immediate access to the additional funds to carry out operations.
It is useful in allowing facility to the holder of the bank account to withdraw more money despite
no balance (Vinczeova, and Kascakova, 2017).
It is a quick way to arrange cash and is highly flexible. It is useful in providing benefit of interest
cost.
Drawback of Overdraft
It is lengthy procedure for companies who have newly established their operations and functions
among industry to avail this from bank onto which there are various work requirements which
shall be focused.
3 Crowd funding
This source of funding can be used as one of the effective source of finance for start-ups
companies who are professionally operating their new start-ups business services and avail use
of promotional services within wide range of consumers market source where crowd funding
also enables to pool in funds from general public.
Benefits: It enables to promote various functional operations to large people within consumer
market share directly where there are various marketing opportunities and techniques available
for strong promotional sources and services (Jung, 2020).
Drawbacks: This is difficult to gain trust of consumers within initial proceedings of business in
start-ups for using crowd funding tool of source of finance which may also impact comapny
goodwill negatively if not used properly.
Peer to peer lending
This source of funding can be understood as source of using funds where the practise of
lending money to individual or businesses through online services are used which match lenders
and borrowers requirements and also technically bring them strongly close to enter on business
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agreement. It is relatively easy source of fund where people can come in contact easily with each
other based on their requirements and investment requirements which enable to develop new
synergy of operations and function with wide efficiency for longer term. Peer to peer lending is
also fast source of funding for companies within their businesses where they wish to yield onto
best investors which can be in same industry or also within friends and families.
Benefits: This is an easy source of funding the finance requirements within companies in same
industry fastly which do not require much legal obligations to avail and is also an smarter and
quicker way for building on business relations (Khan,Quaddus and Geneste., 2020).
Drawbacks: The reliability factor is slow within this source of funding which lowers efficiency
aspect for bringing on stronger paradigm focus and to avail new end long term longevity within
business avenues.
Angel funding
This source of finance in funding can be understood as procedure where a person who
invests in new or small business venture, providing capital for start-up or expansion where
companies use angel investors to use various professional advices from angel investors. The
angel investors also potentially look upon training and providing innovation ideas to company
with having an active participation among the procedures and decisions profoundly impacting
its synergy of continuous innovation.
Benefits: Angel funding is widely a professional source of finding capital for company where
the goodwill is also widely enhanced onto various levels among vivid paradigms, where focus is
also built on wide functional reliability , long term synergy of funding operations onto which
company can utilise funds (Murzacheva and Levie, 2020).
Limitations: This source of funding may reduce functional operations and also major
interference from the angel investors within decisions may reduce efficiency levels onto relative
levels.
Venture finance
This source of funding can be understood as procedure where its private equity financing
that is focused on providing venture capital firms funds to start-ups, new small venture and
various emerging companies which have been deemed to be high growth potential. Venture
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capital is professional and formal source of finance for companies to avail source of funds from
banks. Venture finance is highly used source of fiancé for funding for start-ups where legally
it brings on viable metrics of stronger functional efficiency and actions to keenly promote
synergy of operations with stronger business framework.
Benefits: This is a reliable source of funding where legal operations and funding facilities by
bank are highly legal and also enable companies, start ups for building on strong cpital source.
Limitations: This source of funding has demerit of wide structure complicacy among operations
within companies to avail from bank which may impact onto long term feasibility actions, also
slow various services of banks financial services (Yang, Milner and Gunessee, 2020).
CONLCUSION
The report can be concluded with the fact that there are various source of funds which
companies can vitally use and vitally avail various services onto wider business aspects where
there are various benefits and disadvantages onto which focus shall be driven before analysing
how much they contribute in businesses. Report also concludes the fact that start ups have
various legalities to formally conduct before analysing funding options and to strongly function
vitally ahead within company functional structure.
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REFERENCES
Books and Journals
Bellavitis, C and et.al., 2017. Entrepreneurial finance: new frontiers of research and practice:
Editorial for the special issue Embracing entrepreneurial funding innovations.
Jung, H., 2020. Development finance, blended finance and insurance. International Trade,
Politics and Development.
Khan, E.A., Quaddus, M.,. and Geneste, L., 2020. Micro-Start-Ups financial capital and socio-
economic performance: In a poor financial resource setting. The Journal of
Developing Areas, 54(2).
Murzacheva, E. and Levie, J., 2020. Entrepreneurial finance journeys: embeddedness and the
finance escalator. Venture Capital, pp.1-30.
Vinczeova, M. and Kascakova, A., 2017. How do Slovak small and medium-sized enterprises
make decision on sources of finance. Ekonomicko-manazerske spektrum, 11(2),
pp.111-121.
Yang, S., Milner, S. and Gunessee, S., 2020. Access to Finance, Technology Investments and
Exporting Decisions of Indian Services Firms. Open Economies Review, pp.1-28.
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