3.1 FINANCE AND SUPPORT
3.1 Finance and Support for a Small Business
3 FINANCE
Do you know your money?Match the correct colour and picture on the back to each denomination
£5 Purple Sir John Houlbon 1st Governor of the Bank of England
£10 Blue Sir Edward Elgar Composer
£20 Red Elizabeth Fry Prison Reformer
£50 Brown Charles Darwin Naturalist
3.1 FINANCE AND SUPPORT
HERE ARE THE ANSWERS
3.1 FINANCE AND SUPPORT
ANSWERS
£5 Blue Fry
£10 Brown Darwin
£20 Purple Elgar
£50 Red Houblon
3.1 FINANCE AND SUPPORT FOR A SMALL BUSINESS
In this topic you will learn about
Sources of finance
Sources and types of advice available to small businesses
3.1 FINANCE AND SUPPORT
To start and grow a business finance is
needed.
NEED FOR FINANCE
3.1 FINANCE AND SUPPORT
Why do businesses
need finance?
Rent premises
Why will it be difficult for a new entrepreneur to fund start-up without raising finance?
In pairs complete the diagram below
SOURCES OF FINANCE
So where can a small business get money from?
The Bank Bank loan
A set amount of money borrowed from the bank to be paid back over a period of time
Interest has to be paid on the amount borrowed
Overdraft
The ability to withdraw more money from a bank account than you actually have
Interest rates are often very high
Mortgage
A long term loan secured against an asset, normally a building
3.1 FINANCE AND SUPPORT
Can you define interest rates?
Always have a business plan!
SOURCES OF FINANCE
So where can a small business get money from?
Friends and family Terms and conditions can be agreed between you
and them
May be an informal arrangement
Grants Financial support given to a business
Maybe a government initiative or charitable trust
3.1 FINANCE AND SUPPORT
SOURCES OF FINANCE
Source of Finance Ranking Justification
3.1 FINANCE AND SUPPORT
In pairsLucas wants to set up a small business selling hand made wooden
games and puzzles over the internet. He has identified that he needs £50000 to set up his business. Place 5 possible sources of finance for
Lucas in rank order of preference, justifying your ranking.
30 SECOND TIMER
End
How many banks can you name?Your time starts NOW!
SOURCES OF FINANCE
Source of finance
Advantages Disadvantages
Bank Loan • lump sum• clear terms and conditions• may also get support
• interest payments• strict conditions• needs to be agreed
Overdraft • flexible• provides back up
• high interest• can be withdrawn
Mortgage • regular repayments• lump sum
• secured against an asset• repayments may be high
Friends and family
• flexible • may be cheap or even free
• could spoil relationships• depends on availability
Grants • often with added support• may not need to be repaid
• often difficult to qualify
3.1 FINANCE AND SUPPORT
SOURCES OF FINANCE
3.1 FINANCE AND SUPPORT
Mandy used to work as a costume designer at her local theatre until she left work 3 years ago to bring up her daughter Natalie, now 4 years old. Mandy now works from her house in Slough where she
provides, makes and sells hand made glove puppets. At the moment she sells at local craft fairs and through word of mouth. She now
wants to expand her business to include an on line shop and also to provide puppet shows for children’s parties and puppet making
workshops for slightly older children's parties.
Question time1. Identify 2 reasons why Mandy may need to raise finance. (2 marks)2. Explain 1 advantage and 1 disadvantage of taking out a bank loan.
(4 marks)
3. Mandy is considering applying for an additional mortgage on her house to finance the business expansion. Do you think this is a good idea? Justify your answer. (9 marks)
Remember for the 9 mark question
you need to weigh up both sides
before reaching a conclusion.
SOURCES AND TYPES OF ADVICE AVAILABLE
There is a lot of help available for new businesses
High Street Banks Small business advisors
Consultants
Accountants
Government Organisations Department for Business, Innovation and Skills
Business Link
Regional Development Agencies
Charities The Prince’s Trust
They offer a wide range of expertise and support from drawing up a business plan, marketing, working with suppliers and securing finance to employing staff and growing your business.3.1 FINANCE AND SUPPORT
RESEARCH TASK
Visit the Business link website at www.businesslink.gov.uk to research the types of advice offered by Business link
Design a poster to be displayed at an enterprise conference that will encourage potential entrepreneurs to use the help offered by Business link
3.1 FINANCE AND SUPPORT
2 MINUTE TEST
What is meant by a source of finance?
State 3 different types of finance offered by banks
Name 2 other sources of finance
What are interest rates?
State 2 sources of advice for small businessesEnd
