Sources of finance availiable

• Bank loans / Bank overdrafts

Bank loans are useful when a business is in need of a lot of money quickly, which they know they will be able to pay back. It is a quick source of finance. However, it has to be paid back of course and you can be at risk of unlimited liability which means you have to pay it back with your personal possessions. 

• Owners investments 

This is your own money and therefore you don't have to worry about paying someone back or becoming in debt. The only disadvantages is that if the money invested goes to waste and the business fails, then it is your own personal money which is at stake and goes to waste.

• Family and friends

This is good because your family and friends may not have as strict payment rules as a bank loan, for example the certain time it has to be paid for or the risk of unlimited liability. However this could lead you to argue with family/friends, especially if you struggle to pay them back. 

•  Government grants 

This is good because you don't have to pay the government back, they give it to you for free courtesy. On the other hand, you may be expected to help the government out as a return, and usually through the advantages of your business. An example could be: If there is low employment in the area the government might encourage you to offer more jobs as you are doing them a favour in return for the grant. 

• Retained profits

This is good because you do not have to worry about being in debt or paying back a loaner. However, this is your businesses profit that has been earned, and if the business fails then the profit money spent will have gone to waste. But this is overall good if you are investing it wisely because profit is the ADDITIONAL money earned after you have achieved all your expenses back.