Sources of Financing for Starting a Business For this assignment I will consider the sources of financing that I will need for my business. Why might a business need financing? A business may need financing because it may: • Start a new business and not have enough money to start it. • They may need new equipment to expand the business and earn more profits. • Or they may even want to replace old machinery. • They may want to move the shop to a better location which could benefit the company more. • Or they may want to take over another company. Additional funding can help a business continue trading while it awaits payments for its latest sales. It allows a business to meet ongoing operating costs or help it expand. Funding sources can be divided into two categories: Internal and External. Internal finance is the money that comes from inside a company or any profit made by your business, while external is the money you get from outside the company. For internal finance you can retain profits, reduce stock levels or sell old assets, but for external finance you have more choices: you can borrow money from family or friends to help you, you can get a grant from the Princes Trust, but this it will only need to happen if you have a good idea of ​​what you need the money for and can get a loan from the bank. The difference between a loan and a grant is a loan you don't have to pay back but a grant you make because it comes from the bank. There are other types of finance: • Loans • Overdraft • Trade credit • Factoring • Leasing • Hire purchase • Grants • Mortgage • Issuing shares • Hiring a new partner • Bonds The most appropriate source of finance for my business is: Grant: A grant is given to you by the Prince's Trust. You will only receive this if they think you have good ideas for a business. Grants are similar to loans, but grants are better because you don't have to pay them back. This funding source is useful for any business simply due to the fact that you don't have to repay. The downsides of getting a grant are minimal and may even be non-existent. One complaint might be the long progress of the application, however it will no longer be a problem when you are rewarded with free money.