Source: https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-3-external-finance-2 [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [BTEC](https://senecalearning.com/en-gb/revision-notes/btec.md) › [Business](https://senecalearning.com/en-gb/revision-notes/btec/business.md) › [Business: BTEC Level 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3.md) › External Finance 2 # External Finance 2 Business: BTEC Level 3 National Extended Diploma, topic 3.1.3 ## External Sources of Finance External sources of finance raise finance (money) from a third party. The finance can be used to fund large, long-term investments. However, external finance can be more costly, because loans usually charge interest (which isn't paid if a company funds growth with retained earnings). Some sources of external finance are: ### Business angels ![Business angels](https://image-v2.cdn.app.senecalearning.com/2018-10/32b1105f-69cb-49d8-bc8c-471e61abaf1c/heart-wings-angel-.jpg) - Businesses can obtain finance through business angels. - A business angel is usually an experienced and affluent individual who provides funding in exchange for ownership. - This source of finance has advantages and disadvantages: - Business angel funding involves transferring some ownership which can reduce the original owner’s control. - Business angel funding means that businesses do not have to pay interest. ### Crowdfunding ![Crowdfunding](https://image-v2.cdn.app.senecalearning.com/2018-09/d31f3560-cc61-48cc-b9a3-d7a9c178a034/india-crowd-busy-population-.jpg) - Businesses can obtain funding through crowdfunding. Websites like Seedrs and Kickstarter offer crowdfunding. - Crowdfunding refers to raising finance by allowing large numbers of people to donate often small sums of money to a project or venture. - This source of finance has advantages and disadvantages: - Crowdfunding means that a business owner can retain their existing ownership as the source of finance does not require the sale of shares of the transfer of some ownership. - Crowdfunding can take a long time and may be unsuitable for businesses that need to access funding quickly. ### Example of crowdfunding ![Example of crowdfunding](https://image-v2.cdn.app.senecalearning.com/2018-09/ec647823-1621-417f-a6c1-8e0dbba8f394/coins-912720_1920.jpg) - For example, GoFundMe is a crowdfunding platform that allows individuals and businesses to share information relating to a new product or proposed venture. - Other people can then decide to donate to the individual or business should they decide to do so. - People often make donations in return for a free trial or to access a pre-release of the product should the venture be successful. ## Test yourself on External Finance 2 - What do business angels buy when they invest in a business? [Practise this topic for free](https://app.senecalearning.com/classroom/course/f0389213-3369-45a4-8126-07b001bb9007/section/d3ccb8cb-f2b4-4f36-a0f4-715d3c78fbd1/session) - Previous topic: [3.1.2 External Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-2-external-finance.md) - Next topic: [3.1.4 Sources of Business Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-4-sources-of-business-finance.md) ## Business: BTEC Level 3 National Extended Diploma contents ### 1 Exploring Business - 1.1 Features of Business Organisations - [1.1.1 Sole Traders & Partnerships](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-1-sole-traders-and-partnerships.md) - [1.1.2 Private & Public Limited Companies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-2-private-and-public-limited-companies.md) - [1.1.3 Types of Liability & Not-For-Profits](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-3-types-of-liability-and-not-for-profits.md) - [1.1.4 Purposes of Businesses](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-4-purposes-of-businesses.md) - [1.1.5 Purposes of Businesses 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-5-purposes-of-businesses-2.md) - [1.1.6 The Different Economic Sectors](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-6-the-different-economic-sectors.md) - [1.1.7 Multinational Companies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-7-multinational-companies.md) - [1.1.8 Stakeholders](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-8-stakeholders.md) - [1.1.9 Influence of Stakeholders](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-1-9-influence-of-stakeholders.md) - 1.2 Organisation of Businesses - [1.2.1 Organisational Structure](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-1-organisational-structure.md) - [1.2.2 Types of Organisational Structures](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-2-types-of-organisational-structures.md) - [1.2.3 Business Aims & Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-3-business-aims-and-objectives.md) - [1.2.4 Business Aims](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-4-business-aims.md) - [1.2.5 Business Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-2-5-business-objectives.md) - 1.3 Business Environment - [1.3.1 External Influences](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-1-external-influences.md) - [1.3.2 Political & Legal Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-2-political-and-legal-change.md) - [1.3.3 Economic Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-3-economic-environment.md) - [1.3.4 Social & Technological Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-4-social-and-technological-environment.md) - [1.3.5 Lifestyle & Technological Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-5-lifestyle-and-technological-environment.md) - [1.3.6 Corporate Social Responsibility](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-6-corporate-social-responsibility.md) - [1.3.7 The Competitive Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-7-the-competitive-environment.md) - [1.3.8 Innovation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-8-innovation.md) - [1.3.9 Risk & Uncertainty](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-9-risk-and-uncertainty.md) - [1.3.10 Porter's Five Forces](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-10-porters-five-forces.md) - [1.3.11 SWOT Analysis](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/1-3-11-swot-analysis.md) ### 2 Marketing Campaigns - 2.1 Marketing - [2.1.1 Setting Marketing Objectives](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-1-setting-marketing-objectives.md) - [2.1.2 Customer Needs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-2-customer-needs.md) - [2.1.3 The Market](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-3-the-market.md) - [2.1.4 Competition & The Market](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-4-competition-and-the-market.md) - [2.1.5 Consumer Behaviour](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-5-consumer-behaviour.md) - [2.1.6 Market Research](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-6-market-research.md) - [2.1.7 Forms of Market Research](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-7-forms-of-market-research.md) - [2.1.8 Market Segmentation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-8-market-segmentation.md) - [2.1.9 Cultural & Social Factors in Marketing](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-9-cultural-and-social-factors-in-marketing.md) - [2.1.10 Promotional Decisions 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-10-promotional-decisions-3.md) - [2.1.11 Pricing Strategies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-1-11-pricing-strategies.md) - 2.2 Marketing Mix - [2.2.1 Marketing Mix](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-1-marketing-mix.md) - [2.2.2 Product Life Cycle](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-2-product-life-cycle.md) - [2.2.3 Pricing Decisions & Price Skimming](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-3-pricing-decisions-and-price-skimming.md) - [2.2.4 Pricing Decisions & Price Penetration](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-4-pricing-decisions-and-price-penetration.md) - [2.2.5 Promotional Decisions](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-5-promotional-decisions.md) - [2.2.6 Promotional Decisions 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-6-promotional-decisions-2.md) - [2.2.7 Promotional Decisions 3](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-7-promotional-decisions-3.md) - [2.2.8 Market Mapping](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/2-2-8-market-mapping.md) ### 3 Business Finance - 3.1 Sources of Finance - [3.1.1 Internal Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-1-internal-finance.md) - [3.1.2 External Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-2-external-finance.md) - [3.1.3 External Finance 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-3-external-finance-2.md) - [3.1.4 Sources of Business Finance](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-1-4-sources-of-business-finance.md) - 3.2 Financial Planning - [3.2.1 Revenue](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-1-revenue.md) - [3.2.2 Costs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-2-costs.md) - [3.2.3 Cash & Cash Flow](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-3-cash-and-cash-flow.md) - [3.2.4 Cash & Cash Flow 2](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-4-cash-and-cash-flow-2.md) - [3.2.5 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-5-break-even-analysis.md) - [3.2.6 Profits](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-2-6-profits.md) - 3.3 Financial Statements - [3.3.1 Balance Sheets](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-1-balance-sheets.md) - [3.3.2 Income Statements](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-2-income-statements.md) - [3.3.3 Liquidity](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/3-3-3-liquidity.md) ### 4 International Business - 4.1 Globalisation - [4.1.1 Growing Economies](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-1-1-growing-economies.md) - [4.1.2 Specialisation & Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-1-2-specialisation-and-trade.md) - 4.2 International Business - [4.2.1 Internationalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-1-internationalisation.md) - [4.2.2 International Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-2-international-trade.md) - [4.2.3 MNCS](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-3-mncs.md) - [4.2.4 Conditions that Prompt Trade](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-4-conditions-that-prompt-trade.md) - [4.2.5 Assessment of a Country](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-2-5-assessment-of-a-country.md) - 4.3 International Economic Environment - [4.3.1 Globalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-1-globalisation.md) - [4.3.2 Factors Contributing to Globalisation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-2-factors-contributing-to-globalisation.md) - [4.3.3 Protectionism](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-3-protectionism.md) - [4.3.4 The EU & the WTO](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-4-the-eu-and-the-wto.md) - [4.3.5 Trading Blocs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-3-5-trading-blocs.md) - 4.4 Factors Affecting International Business - [4.4.1 Global Competitiveness](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-1-global-competitiveness.md) - [4.4.2 Ethics of Global Business](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-2-ethics-of-global-business.md) - [4.4.3 Controlling MNCs](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-3-controlling-mncs.md) - [4.4.4 Cultural & Social Factors in Marketing](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/4-4-4-cultural-and-social-factors-in-marketing.md) ### 5 Principles of Management - 5.1 Management & Leadership - [5.1.1 Managers](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-1-managers.md) - [5.1.2 Management Theories](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-2-management-theories.md) - [5.1.3 Managing Organisational Culture](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-3-managing-organisational-culture.md) - [5.1.4 Management Style](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-1-4-management-style.md) - 5.2 Theories of Motivation - [5.2.1 Motivating & Engaging Employees](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-1-motivating-and-engaging-employees.md) - [5.2.2 Taylor's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-2-taylors-theory.md) - [5.2.3 Mayo's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-3-mayos-theory.md) - [5.2.4 Maslow's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-4-maslows-theory.md) - [5.2.5 Herzberg's Theory](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-2-5-herzbergs-theory.md) - 5.3 Managing Change - [5.3.1 Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-1-change.md) - [5.3.2 Key Factors in Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-2-key-factors-in-change.md) - [5.3.3 Scenario Planning](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-3-scenario-planning.md) - [5.3.4 Managing Change](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-4-managing-change.md) - [5.3.5 Managing Strategic Implementation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/5-3-5-managing-strategic-implementation.md) ### 6 Business Decision Making - 6.1 Business Principles & Practices - [6.1.1 Influences in External Environments](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-1-influences-in-external-environments.md) - [6.1.2 Product Decisions](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-2-product-decisions.md) - [6.1.3 Competitive Environment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-3-competitive-environment.md) - [6.1.4 Corporate Strategy](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-4-corporate-strategy.md) - [6.1.5 Quantitative Sales Forecasting](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-5-quantitative-sales-forecasting.md) - [6.1.6 Legislation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-1-6-legislation.md) - 6.2 Quality Management - [6.2.1 Importance of Quality](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-1-importance-of-quality.md) - [6.2.2 Measuring Quality](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-2-measuring-quality.md) - [6.2.3 Total Quality Management](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-3-total-quality-management.md) - [6.2.4 Evaluating TQM](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-2-4-evaluating-tqm.md) - 6.3 Human Resources - [6.3.1 Contracts](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-1-contracts.md) - [6.3.2 Recruitment](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-2-recruitment.md) - [6.3.3 Training a Workforce](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-3-3-training-a-workforce.md) - 6.4 Documents & Business Decisions - [6.4.1 Sales Forecasts](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-1-sales-forecasts.md) - [6.4.2 Managing Strategic Implementation](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-2-managing-strategic-implementation.md) - [6.4.3 Problems with Strategy](https://senecalearning.com/en-gb/revision-notes/btec/business/business-btec-level-3/6-4-3-problems-with-strategy.md)