P4 Describe Sources of Internal and External Finance for a Selected Business. Essay

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Report to: Head of Finance
Report From: Monaj Gurung
Date: 23rd October 2012
Title: sources of internal and external finance for Waitrose
Source of Finance
All business needs money in order to operate properly. Finance simply means the management of some amounts of money. And source of finance is generally the place where money comes from. Example Waitrose gets money by selling their products to the customers and hence customers are the different classes Internal and External source of finance.
Internal Sources: Internal source are usually from inside of the business organisation which are often preferable to any organisation as they will usually be cheaper and perhaps easier to arrange. However, the potential of arranging large …show more content…
And in return interests are paid to them with the actual amount they had provided to the individual or organisation. 2. Building societies: A building society is a form of financial that is similar to a bank. They are able to provide loans but specialises in providing mortgages. And interest is payable based on the risk of the venture. It might be useful to Waitrose in some point of view as they function like that of Banks. It is very useful in relation to Waitrose for getting small amount of money which probably might be in low interest rate. But if Waitrose wants to get a large amount of money then Building societies may not afford such amount of money. 3. Venture Capital: Some individuals join together to provide finance for new businesses that are just starting up. They look for promising businesses and invest them; hoping that the business will grow and those they will make a profit. Waitrose could be able to use venture capital as an External source as it is much cheaper than Bank and interest rate are much cheaper than the Bank rate. 4. Hire purchase: It is legal term for contract; in which person usually agree to pay for goods in parts or a percentage at a time. This type of external source could be beneficial for Waitrose when they are in heavy debt and are unable to pay at a mean time. Hence, they can be able to pay it in parts at a time and can be able to clear their debt
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