Finance For A Small Business Essay

Finance for a small business. Finance for a large business and public finance. The accounts the profit and loss account and the balance sheet. Cash flow and working capital. Analysing the accounts. Success and failure in business.

There are many ways of deciding what size of a business is a small one. The most accepted definition is laid down by the 1981 Companies Act. This defines a small firm as one that during an accounting year does not exceed two of the following:

For setting up and operating the business people will need finance. These financial needs will be for start-up capital, long-term finance and short-term finance. Start-up capital is finance provided by the owners of a business. Long-term finance is money that is borrowed by a business for more than one year before repayments is due. And short-term finance is money that is borrowed by a business that has to be repaid within a year.

Also small business has a more limited range of finance sources than a large business. For example:

Trade credit is an important source of short-term finance. It is the time allowed by suppliers between buying goods and paying for them.

Bank overdraft is an easily arranged source of short-term finance. It is money borrowed from a bank, greater than that which is in your account. But there are risky in using an overdraft.

Bank loan is more certain way for a small business to borrow from a bank. This is for a specific amount for a set period of time.