Business angels

Wealthy and successful private individuals who risk their own money in a business venture that has high growth potential.

Capital expenditure

Refers to business spending on fixed assets or capital equipment of a business, e.g. spending on buildings, machinery and tools.

Debt factoring

A financial service provided to businesses that are struggling to collect money from their debtors so face liquidity problems.

External sources of finance

Finance that comes from outside the organization, usually with the help of a third party provider, such as a bank, business angel, venture capitalist or government.

Grants

Type of financial aid for businesses, paid as a lump sum from the government, which does not need to be repaid.

Initial public offering (IPO)

Finance raised by a public limited company when it issues (sells) shares for the very first time on a stock exchange.

Internal sources of finance

Finance that come from within the organization, from its own resources and assets without the help of a third party provider.

Leasing

This financial service enables businesses to have access to fixed assets, by hiring these assets, but without the high costs of capital expenditure.

Loan capital

Also known as debt capital, this refers to borrowed funds from financial lenders, such as commercial banks.

Long-term finance

Refers to sources of finance of more than five years, for the purchase of long-term fixed assets or to fund the growth of a business in overseas markets.

Medium-term finance

Refers to all sources of finance of one to five years in duration. The finance is used mainly to pay for fixed assets, i.e. capital expenditure.

Overdraft

A banking service that enables customers (personal and business customers) to withdraw more money from their account than exists in the account.

Personal funds

Internal source of finance, with entrepreneurs using their own savings, usually to finance their start-up business.

Retained profit

Also known as ploughed-back profit, this is the surplus funds that are reinvested back in the business, rather than being distributed to the owners.

Revenue expenditure

Refers to business spending on its everyday and regular operations, e.g. spending on wages, raw materials and bills.

Share capital

Also known as equity capital, this is finance raised through the issuing of shares via a stock exchange (or stock market).

Share issue

The process involving a public limited company selling additional shares in order to raise finance.

Short-term finance

Refers to sources of finance needed for the day-to-day running of the business, i.e. revenue expenditure.

Stock exchange

A highly regulated marketplace where individuals and businesses can buy and sell shares in public limited companies.

Subsidies

Form of government assistance, provided to encourage firms to increase their output of certain goods or services, which are deemed to be beneficial for society as a whole.

Trade credit

Financial service that enables a business customer to purchase and obtain goods and services but to pay for these at a later date.

Venture capitalists

Financial institutions and investment banks that invest in start-up firms and/or small but expanding businesses with significant growth potential.