WHICH METHODS OF FINANCE SHOULD YOU USE WHETHER YOUR BUSINESS HAS LIMITED OR UNLIMITED LIABILITY.?

1. • Fixed cost
Cost that stay the same at all levels of output in
the short term for example factories machinery…
This costs remain the same whether a business
produces something, or not.
Variable costs:
cost of production which increase directly as
output increases. Example: raw materials,
packaging, wages….
If thge business does not produce anything the
variable costs will be zero
Total variable cost= Variable cost per unit X
output
Variable cost
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Fixed cost
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2. Appropiate souces of finance for Limited or
Unlimites liability:
• Unlimited liability
• Personal savings -
Retained profit - can only be used if the business survives and is established
• Mortgage - use the owners house as colateral for a business loan this provides a source of long
term finance
• Unsecured bank loans - it depends on the financial climate at the time of request
• Pier to pier - the owners will have to check with individual sites to see if business can borrow
• Crowed funding - provide long term finance
• Bank overdraft - established and profitable businesses will have access to much larger overdraft
than those that are not
• Grants - free source of finance and have to have a good reputation to get
•

3. • Limited liability
• Share capita - allows limited companies to raise very large amounts of capital
• Debentures - they can last up to 30 years and like share holders debenture share holders
do not have any control over the business
• Retained profit - some very large companies have hundreds of millions of pounds in cash
reserves which are likely to be used by the business in the future
• Venture capitalists - the majority of finance provided by venture capitalist finds its way
into limited companies, one reason is because they usually take a share in the business
• Business angles - they are often difficult to find, this means entrepreneurs spend to long
searching for suitable angles when they could be focusing on the development of the
business
• Other sources - they are likely to use bank overdraft, trade credit, leasing, unsecured
bank loans, mortgages and grants in some combination or another, large companies are
much less likely to use sources such as crowdfunding and P2PL