First to fall I would like to present what a small business is. Trade credit. Bank overdraft. Bank loan. Otner sources of finance. There is a great variety of sources of loan finance. Other sources of long-term loans. Short-term sources of finance. Bank overdraft. Hire purchase and leasing. Factoring. Why are accounts kept? What is profit? The balance sheet. Cash flow. Managing the cash flow. Ratios. Why are big companies unsuccessful?

In the book are suggested some criteria according which we can say, that it is a small business. These are:

In a small business money is needed for three main reasons:

In using their own savings as capital entrepreneurs are accepting a risk. There is the possibility of losing not on the capital they have invested, but also any other savings and possessions they have. This is because of unlimited liability. Unlimited liability means that the owner is liable for the debts of the business. They gain all the profits but at the same time face the risk of all the losses.

Suppliers usually allow a small business a period of time between buying materials and paying for them. Normally, this will be between one and three months. This trade credit is an important source of short-term finance.

A small business can not pay for its supplies until they are used in making a product and the product is sold. If a service is paid for after it is received, for example the work of an electrician, then this is known as an expense creditor.

There are limitations to trade credit. Any discounts which suppliers offer for a payment will be lost if credit is asked for. A supplier may not give credit to a new business.

This is where a bank allows customers to draw more from their bank account than they have deposited. It is an easily arranged source of short-term finance. The bank will decide an overdraft limit - the maximum that can be overdrawn. After that the business can withdraw or repay funds when it likes up to that limit. It is flexible, and a business has to pay only interest on the amount overdrawn at any one time. This makes it a cheap source of finance. A small business needs an overdraft to meet its day-to-day expenses when revenue is not earned immediately.

For a small business there are risks in using an overdraft.

Rates of interest can increase depending on the economic climate and interest costs could cause a problem if large sums are overdrawn for a period of time. The bank can also decide at any time to reduce the limit or call in the overdraft.

  • Anglų kalba Savarankiškas darbas
  • Microsoft Word 31 KB
  • 2017 m.
  • Anglų
  • 5 puslapiai (2596 žodžiai)
  • Universitetas
  • Vika
  • Business
    10 - 1 balsai (-ų)
Business . (2017 m. Balandžio 05 d.). Peržiūrėta 2018 m. Vasario 24 d. 18:23