Internal And External Finance Essay
TASK 3 (A)
Sources of Internal and External Finance for business There are some finance sources in short term. They are called in such a way because they must be paid within a year. Other sources of finance can be paid back over many years. These can be considered long term sources.
Short Term Sources
Bank Overdraft – the bank allows Crowne Regency Hotel to withdraw an amount more than the expected account balance.
Trade Credit – this is where the merchant that is engaged with the business allows it to have an installment type of payment for the goods purchased and gives grace period to the business for it to finish paying for the goods purchased.
Long Term Sources
Capital or Investment – it is the amount of money and other assets given by the owner/s of
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An example will be profits. They can be kept back to finance expansion. Also, the business can sell assets (items it owns) that are no longer needed to free up cash.
Whilst profits and assets are considered as internal sources, creditors or banks can be considered as External Sources because they are found outside the business.
Internal Source of Finance of Crowne Regency Hotel:
Personal Sources – Personal is one of the internal sources of finance that the hotel is using.
When the hotel has just started the operations, we used our entrepreneur’s personal savings. The hotel also borrowed from friends and family which is common nowadays. This is better to arranged compared to asking a loan from the bank.
Retained Profits – is the money that is created by the business when it exchanges beneficially.
Shared Capital – this is invested by the owner of our hotel. The upsides of putting resources into offer capital are secured in the area on business structure.
External Source of Finance of Crowne Regency Hotel:
Shared Capital – (outside investors) one of the main source of external investor of our hotel are the owner’s friends and
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