Small Business

Small business.

the amount of capital the business has at its disposal

The rate that a small business is charged for its loan is higher than for a larger company.

The leasing of equipment can have significant benefits for a business.

Instead of buying his van, or a photocopier for the office, a small firm owner might lease them. In this way he avoids having to pay for them all at once. The leasing company keeps ownership of the van or photocopier and he pays a regular monthly sum for using the items. The leasing company also carries out repairs and maintenance, and will take back the machine when is no longer needed, breaks down or becomes obsolete. If he falls behind in his payments, their the machine would be collected by the hire purchase company, even if the payments were nearly complete.

They might also be able to get assistance from European Community grants, but again this will depend upon the area in which he sets up.

Large business companies are usually limited companies or public limited companies.

Below are some features of the way a limited company will raise capital

Each owner of the company puts an amount of capital into the company which is divided into shares of fixed amounts.

The traditional sources of long-term funds for business are provided by the stock market, banks and building societies but outside this group there are other schemes for helping companies to gain long-term funds.

One such source is venture capital where separate companies, sometimes owned by financial institutions, invest money into new and growing firms. They are often willing to support projects or ideas that are risky and which banks would be unlikely to support.

Businesses will need short-term sources of funds to meet their needs for working capital, that is, money to meet the day-to-day cash requirements of the business. This would include paying bills, paying wages, and paying interest on loans.

Large companies will be able to generate more cash than smaller organisations, but from time to time will need an overdraft to meet a gap between payments and receipts.

Both large and small businesses are using these methods of finance, especially for the purchase of machinery and vehicles. A considerable percentage of large businesses use hire purchase to buy business assets, while it is now possible for an airline to lease planes valued at millions of pounds.