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Essay on Investigating the Sources of Finance

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Investigating the Sources of Finance

I'm now going to investigate the sources of finance available to you
when setting up your new business. I will separate the sources of
finance needed into three categories; start-up costs, running costs
and expansion costs.

When starting up your new business premises will need to be secured
from which you will trade. I'm going to look at ways that you could
secure premises. The first option available to you is a mortgage;
these are long-term loans offered by banks or building societies based
on property as collateral. Interest must be paid on the mortgage, but
this will cover the original sum and when the money has been paid
back, you become the owner of the property. Alternatively you could
choose the option of renting; this is when a weekly or monthly sum is
paid to the landlord for the service of being able to trade from the
property. Renting will probably be cheaper as no interest has to be
paid. Another advantage is if you moved premises or ceased trading and
had a mortgage, the mortgage lender would gain ownership of the
premises, whereas if you rented you would only have to stop paying
rent. My recommendation is to rent premises for the first 2-3 years,
if your business is successful and you plan to stay where you are then
apply for a mortgage. There is less risk this way, as if you had a
mortgage and your business was unsuccessful and you ceased trading,
your premises would be lost and then gained by the mortgage lender.
However, if you choose the option of renting this would then become a
running cost.

As well as premises your business will also need to purchase machinery
and e...


... middle of paper ...


...uture I would advise you to take up
the third option of renting or purchasing an additional site. My
reasons for this are; there is no hassle of possibly closing down your
business whilst building work takes place on your existing site. You
will also have sites in two areas, making you able to establish
yourself in the new area, as well as further establish yourself in the
existing area, thus creating more revenue and profit. Finally there
isn't as much risk as moving to a new larger site, because if your
business fails in the new site everything is lost, whereas if you rent
or purchase an additional site only your start-up costs will be lost
if the business fails. And you will still have your old site.

I hope that you will find the information provided helpful when
selecting sources of finance for your new business.


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