Advantages and disadvantages of sources of finance for expansion Trade Credit Advantages • Helps cash flow situation • Pay creditors at a later stage allowing goods to be sold Disadvantages • If company has poor credit history Sale of Assets Advantages • If property it may have appreciated Disadvantages • Depreciation – value has decreased therefore not worth as much as when the company bought it Hire Purchase Advantages • Quick and easy to raise finance • No security • Will eventually own it and will become an asset Disadvantages • Not owned until item is fully paid for • Interest charged Credit cards Advantages • Easy way to pay for goods • Can aid cash flow Disadvantages • Not a way a business would use if considering expansion • High interest charged Share issues Advantages • Share of the profits • Part ownership of the business • Have a vote (only ordinary) • Raise a lot of cash Disadvantages • Profits shared • Ownership and control – who has it? Debt factoring Advantages • Ease cash flow problems Disadvantages • High interest • Risk of lower value of sales Venture Capital Advantages • Raise large amounts of Capital • Good way for expansion if you have a good product/idea Disadvantages • Venture capitalist own part of the business • Will sell off once money is made meaning other sources of finance for expansion will need to be looked at Loan/overdraft Advantages • Quick way to raise cash • Eases cash flow problems • Flexible • Short-term Disadvantages • Interest Government assistance – (grants) Advantages • Usually free • Can be large amounts Disadvantages • Certain criteria to be awarded one e.g. areas of high unemployment • Application can be difficult