Sources of finance

Internal Funding: Control Preserved, Cash Limited New and growing businesses first weigh internal sources generated within the firm: personal savings, retained profit, and sale of assets. Personal savings and retained earnings preserve ownership and avoid interest. Retained profit can disappoint shareholders expecting dividends. Selling assets quickly turns fixed assets into cash but reduces the ability to produce and earn revenue.

Borrowing Options: Interest, Collateral, and Flexibility Family and friends may lend based on personal trust, but funds are limited and unpaid debts strain relationships. Bank loans provide lump sums without diluting ownership but demand interest and often collateral that can be reclaimed on default. Overdrafts offer short‑term flexibility with interest charged only on what’s used, yet rates are typically higher. When banks are cautious, peer‑to‑peer platforms link borrowers and lenders directly, potentially improving terms while carrying less regulation and security.

Alternative Financing: Cash‑Flow Tools, Risk Capital, Grants, and Share Issues Leasing and trade credit ease cash flow by spreading payments or delaying them, improving liquidity but foregoing ownership and facing supplier limits on terms. Business angels provide venture capital and market expertise and accept higher risk in exchange for a sizable ownership stake. Crowdfunding raises small contributions from many without collateral or rigid agreements, yet persuading backers often requires perks and can be challenging. Government grants offer funding with no repayment, but access is difficult and demands strong justification such as environmental or community benefits. Issuing shares supplies major capital without interest or repayments, while diluting control and creating expectations of dividends.