The Source of finance for a business depends on the amount of capital required and the term for which it needed (thebalance, 2016). Without cash, the business would not be able to survive with many possible uses of finance wages or advertising. So, some source of finance should be available for the businesses. Rosshandler in this case has the choice of giving away 75% of her business, however there are other sources of finance that can be chosen.
Generally, finance has internal and external sources. Internal source of finance, for instance, can be found inside the company like profit from selling goods or service which kept back to finance the business expansion for future activities (BBC,2014). It can also be from assets, when the company sells it like equipment. But, Rosshandler business's did not have significant sales and her company was about to run out of money, so she did not have internal sources of finance. Hence, she can use external source of finance which is found from outside the company for example from creditors (BBC,2014) . It include long-term loan and short-term. Short-term means must be paid off within a year. For example, trade credits are supplier which deliver goods now and waiting few days before payment. On the other hand, long-term can be paid back in more than a year for example small
…show more content…
It has several advantages and disadvantages. The advantages are allows you to pay new building, equipment and other assets used to improve and grow your business before you earn funds. The interests are clear, therefore, it is easier to plan for in budget. The bank has flexibility like small business. It has a complete picture of how to control over business. The disadvantages are you have to repay the loan in a period of time, plus interest. You may find cash flow problems. Debt might make your company difficult to