The document provides advice for two new hairdressers starting a business on internal and external sources of finance available as business partners. Internal sources include using their own savings which provides flexibility but is limited in amount, or using one partner's savings which helps financially but relies on that partner. Business profits can also be used, with the distinction that gross profits are not actual profits while net profits are actual retained earnings after expenses. External sources include bank overdrafts which provide flexibility in borrowing only what is needed and are reliable as long as terms are met.

1. My supervisor has asked me to provide advice and guidance to the two recent qualified hairdressers who are currently in the process of starting a new business. <br />Internal sources of finance available in partnership<br />Own savings- this is quite simply amounts of money that a business person has saved and a partner or even a shareholder is allowed to access. However if that person uses their savings to invest in their own or another business then the sources of finance comes under the heading of personal savings. <br />Advantages –Emma and John would be able to spend their own money on whatever they like for the business. It does not have to be for a specific purpose because it is a saving. Therefore, they can slowly build up and develop by introducing new things to the business every so often. <br />Disadvantages <br />Other partner savings – this is similar to own savings however it is the other member of the partnership that is using their own money out of their pocket to improve the financial boost by helping out with small things like buying the hairdressing equipment or even by paying off small bills.<br />Business profits- this is basically the income a business earns in a certain period of time. There are however two types of profit which are gross and net profit. Gross profit is not the actual profit of the business and it is taken from the cost of goods sold from the net sales. Moreover, net profit is considered as the actual profit retained by a company and it is actually the difference between the revenue earned by the business and the expenses incurred.<br />External sources of finance available in partnership <br />Bank overdrafts- this is simply a short term loan taken out by a company or individual that is normally repayable on demand. With the overdraft the amount of borrowing may vary on a daily basis.<br />Advantages - it is flexible in the way that you can only borrow what you need at the time which may make it cheaper than a loan. They are also very reliable and secure and you can be assured for the money unless the terms and conditions are broken. As well as this you will be fully aware of what you owe and the repayments <br /> <br />