External finance - Banks - Sources of finance - National 5 Business management Revision - BBC Bitesize (2024)

External finance - Banks

Bank overdraft

A bank overdraft is a facility that will allow you to withdraw more money from your account than is available. A bank overdraft is a short term source of finance.

AdvantagesDisadvantages
Can be arranged quicklyExpensive as a high rate of daily interest is charged
Usually only available for small sums of money
AdvantagesCan be arranged quickly
DisadvantagesExpensive as a high rate of daily interest is charged
Advantages
DisadvantagesUsually only available for small sums of money

Bank loan

A bank loan is a long term source of finance. It is a fixed amount of money that is given to a business by the bank that has to be repaid over time with , usually in monthly instalments.

AdvantagesDisadvantages
Can be arranged quicklyInterest has to be paid in addition to the loan amount
Loan can be repaid over a long period of time
AdvantagesCan be arranged quickly
DisadvantagesInterest has to be paid in addition to the loan amount
AdvantagesLoan can be repaid over a long period of time
Disadvantages

Mortgage

A mortgage is a long term source of finance. It is a sum of money borrowed from the bank that is secured against a property and paid back in , usually over a long period of time.

AdvantagesDisadvantages
Mortgage is given for a long period of timeInterest is charged on the loan
Large amounts of finance can be raised quicklyProperty can be lost to the mortgage lender if repayments are missed
AdvantagesMortgage is given for a long period of time
DisadvantagesInterest is charged on the loan
AdvantagesLarge amounts of finance can be raised quickly
DisadvantagesProperty can be lost to the mortgage lender if repayments are missed

External finance - Banks - Sources of finance - National 5 Business management Revision - BBC Bitesize (1)

External finance - Banks - Sources of finance - National 5 Business management Revision - BBC Bitesize (2024)
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