Source: https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-2-factors-affecting-sources-of-finance [Revision notes](https://senecalearning.com/en-gb/revision-notes.md) › [IGCSE](https://senecalearning.com/en-gb/revision-notes/igcse.md) › [Business](https://senecalearning.com/en-gb/revision-notes/igcse/business.md) › [Edexcel IGCSE](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse.md) › Factors Affecting Sources of Finance # Factors Affecting Sources of Finance Business: Edexcel IGCSE, topic 3.1.2 ## Factors Affecting Best Sources and Methods of Financing Lots of different factors affect what is the best source of financing for a business: ### New vs established business ![New vs established business](https://image-v2.cdn.app.senecalearning.com/2018-03/d0fa2897-4665-479b-86b0-a07541b10d99/shutterstock_211654672.jpg) - A company’s size and track record can affect the availability and cost of finance. - New businesses are likely to find it harder to get loans from a bank but can take advantage of hire purchases and trade credit. - Established companies are also much more likely to be larger and therefore require larger investments. - External sources of finance are preferred when the size of the investment is large as internal sources of finance are often limited. ### Financial situation ![Financial situation](https://image-v2.cdn.app.senecalearning.com/2018-03/8c9840ed-6029-4194-aa17-6d11e37d4f6d/shutterstock_497088016.jpg) - Whether a business is in a good financial situation can impact the availability and cost of finance. - A business that is struggling may not be able to get loans as it is much more likely that they won’t pay them back. Even if they are able to get loans, these loans will have much higher interest payments. - A business that is struggling is also less likely to be able to use internal sources of finance. ### Long-term vs short-term ![Long-term vs short-term](https://image-v2.cdn.app.senecalearning.com/2018-03/e8993a9d-6ee4-4c6b-9a80-3446dccf25cb/shutterstock_651190168.jpg) - The length of time that finance is needed for affects which type of finance is best. - Trade credits are an example of short-term finance. A supplier is likely to only give the business an extension of a few days or weeks. - Bank loans and mortgages are a long term source of finance and may only be paid back in full after 20 years. ### Cost ![Cost](https://image-v2.cdn.app.senecalearning.com/2018-03/d70c956d-36db-449a-adc3-781158483879/shutterstock_547096873.jpg) - External financing tends to be more expensive because a business normally has to pay interest on external financing. ## Test yourself on Factors Affecting Sources of Finance - How do struggling businesses source finance? - Which of the following is a short-term source of finance? - I'm setting up a new business selling toothbrushes for animals. Which source of finance am I likely to struggle to get? - Which of the following businesses will find it easiest to source finance? [Practise this topic for free](https://app.senecalearning.com/classroom/course/842fa0dc-132a-4180-9456-45b3931aca6b/section/acb04b9b-525f-4460-afe2-3c68f56ff250/session) - Previous topic: [3.1.1 Internal & External Sources of Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-1-internal-and-external-sources-of-finance.md) - Next topic: [3.2.1 Cash Flow](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-1-cash-flow.md) ## Business: Edexcel IGCSE contents ### 1 Business Activity & Influences on Business - 1.1 Business Objectives - [1.1.1 Business Aims](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-1-business-aims.md) - [1.1.2 Business Objectives](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-2-business-objectives.md) - [1.1.3 Business Objectives Change Over Time](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-3-business-objectives-change-over-time.md) - [1.1.4 End of Topic Test - Business Aims](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-4-end-of-topic-test-business-aims.md) - [1.1.5 Diagnostic Misconceptions - Profit](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-1-5-diagnostic-misconceptions-profit.md) - 1.2 Types of Organisations - [1.2.1 Sole Traders & Partnerships](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-1-sole-traders-and-partnerships.md) - [1.2.2 Limited Companies](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-2-limited-companies.md) - [1.2.3 Limited Liability](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-3-limited-liability.md) - [1.2.4 Unlimited vs Limited Liability](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-4-unlimited-vs-limited-liability.md) - [1.2.5 Not For Profit & Franchises](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-5-not-for-profit-and-franchises.md) - [1.2.6 Multinational Companies](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-6-multinational-companies.md) - [1.2.7 End of Topic Test - Business Ownership](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-7-end-of-topic-test-business-ownership.md) - [1.2.8 Application Questions - Business Ownership](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-8-application-questions-business-ownership.md) - [1.2.9 Diagnostic Misconceptions - Company vs Business](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-9-diagnostic-misconceptions-company-vs-business.md) - [1.2.10 Diagnostic Misconceptions - Owners vs Shareholders](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-2-10-diagnostic-misconceptions-owners-vs-shareholders.md) - 1.3 Classification of Businesses - [1.3.1 Sectors](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-3-1-sectors.md) - 1.4 Decisions on Location - [1.4.1 Location](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-4-1-location.md) - 1.5 Business & the International Economy - [1.5.1 Globalisation](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-5-1-globalisation.md) - [1.5.2 Exchange Rates](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-5-2-exchange-rates.md) - 1.6 Government Objectives & Policy - [1.6.1 Government Objectives](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-1-government-objectives.md) - [1.6.2 The Government & Business Activity](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-2-the-government-and-business-activity.md) - [1.6.3 Interest Rates](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-3-interest-rates.md) - [1.6.4 Interest Rates - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-4-interest-rates-calculations.md) - [1.6.5 Diagnostic Misconceptions - Recessions](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-6-5-diagnostic-misconceptions-recessions.md) - 1.7 External Factors - [1.7.1 External Factors](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-7-1-external-factors.md) - 1.8 What Makes a Business Successful? - [1.8.1 Measuring Success](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-8-1-measuring-success.md) - [1.8.2 Reasons for Failure](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/1-8-2-reasons-for-failure.md) ### 2 People in Business - 2.1 Internal & External Communication - [2.1.1 Communication](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-1-1-communication.md) - 2.2 Recruitment & Selection Process - [2.2.1 Types of Employment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-1-types-of-employment.md) - [2.2.2 Recruitment Stages](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-2-recruitment-stages.md) - [2.2.3 Effective Recruitment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-3-effective-recruitment.md) - [2.2.4 Legal Controls Over Employment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-4-legal-controls-over-employment.md) - [2.2.5 Diagnostic Misconceptions - Internal Recruitment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-2-5-diagnostic-misconceptions-internal-recruitment.md) - 2.3 Training - [2.3.1 Training](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-3-1-training.md) - 2.4 Motivation & Rewards - [2.4.1 Motivation in the Workplace](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-1-motivation-in-the-workplace.md) - [2.4.2 Financial & Non-Financial Methods](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-2-financial-and-non-financial-methods.md) - [2.4.3 End of Topic Test - The Workforce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-3-end-of-topic-test-the-workforce.md) - [2.4.4 Application Questions - The Workforce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-4-application-questions-the-workforce.md) - [2.4.5 Diagnostic Misconceptions - Money](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-4-5-diagnostic-misconceptions-money.md) - 2.5 Organisation Structures - [2.5.1 Organisational Structures](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-1-organisational-structures.md) - [2.5.2 Centralised vs. Decentralised Structures](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-2-centralised-vs-decentralised-structures.md) - [2.5.3 Tall & Flat Organisations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-3-tall-and-flat-organisations.md) - [2.5.4 Functional Areas Within a Business](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-4-functional-areas-within-a-business.md) - [2.5.5 End of Topic Test - Org Structure](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/2-5-5-end-of-topic-test-org-structure.md) ### 3 Business Finance - 3.1 Sources of Finance - [3.1.1 Internal & External Sources of Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-1-internal-and-external-sources-of-finance.md) - [3.1.2 Factors Affecting Sources of Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-1-2-factors-affecting-sources-of-finance.md) - 3.2 Cash Flow Forecasting - [3.2.1 Cash Flow](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-1-cash-flow.md) - [3.2.2 Consequences of Cash Flow Problems](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-2-consequences-of-cash-flow-problems.md) - [3.2.3 Cash Flow - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-3-cash-flow-calculations.md) - [3.2.4 Solutions to Cash Flow Problems](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-4-solutions-to-cash-flow-problems.md) - [3.2.5 Diagnostic Misconceptions - Cash Flow](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-2-5-diagnostic-misconceptions-cash-flow.md) - 3.3 Cost & Break-Even Analysis - [3.3.1 Costs, Revenue & Profit](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-1-costs-revenue-and-profit.md) - [3.3.2 Profit, Average Unit Cost & Interest](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-2-profit-average-unit-cost-and-interest.md) - [3.3.3 Costs - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-3-costs-calculations.md) - [3.3.4 Revenue - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-4-revenue-calculations.md) - [3.3.5 Break-Even Analysis](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-5-break-even-analysis.md) - [3.3.6 Profit & Losses - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-6-profit-and-losses-calculations.md) - [3.3.7 End of Topic Test - Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-7-end-of-topic-test-finance.md) - [3.3.8 Grade 9 - Finance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-8-grade-9-finance.md) - [3.3.9 Diagnostic Misconceptions - Fixed Costs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-9-diagnostic-misconceptions-fixed-costs.md) - [3.3.10 Diagnostic Misconceptions - Break-even](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-3-10-diagnostic-misconceptions-break-even.md) - 3.4 Financial Documents - [3.4.1 Financial Statements](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-1-financial-statements.md) - [3.4.2 Income Statement](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-2-income-statement.md) - [3.4.3 Understanding Business Performance](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-4-3-understanding-business-performance.md) - 3.5 Account Analysis - [3.5.1 Business Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-1-business-calculations.md) - [3.5.2 Gross Profit - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-2-gross-profit-calculations.md) - [3.5.3 Net Profit - Calculations](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-3-net-profit-calculations.md) - [3.5.4 Business Calculations 2](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-4-business-calculations-2.md) - [3.5.5 Business Calculations 3](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-5-business-calculations-3.md) - [3.5.6 Liquidity](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/3-5-6-liquidity.md) ### 4 Marketing - 4.1 Market Research - [4.1.1 Market Research](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-1-1-market-research.md) - [4.1.2 Forms of Market Research](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-1-2-forms-of-market-research.md) - 4.2 The Market - [4.2.1 Customer Needs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-1-customer-needs.md) - [4.2.2 Satisfying Customer Needs](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-2-satisfying-customer-needs.md) - [4.2.3 Market](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-3-market.md) - [4.2.4 The Competitive Environment](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-4-the-competitive-environment.md) - [4.2.5 Market Segmentation](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-5-market-segmentation.md) - [4.2.6 Market Mapping - Price vs Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-6-market-mapping-price-vs-quality.md) - [4.2.7 End of Topic Test - Marketing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-7-end-of-topic-test-marketing.md) - [4.2.8 Application Questions - Marketing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-8-application-questions-marketing.md) - [4.2.9 Diagnostic Misconceptions - Competition](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-2-9-diagnostic-misconceptions-competition.md) - 4.3 The Marketing Mix - [4.3.1 Price](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-1-price.md) - [4.3.2 Price Penetration](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-2-price-penetration.md) - [4.3.3 Other Forms of Pricing](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-3-other-forms-of-pricing.md) - [4.3.4 Product Design](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-4-product-design.md) - [4.3.5 The Product Life Cycle](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-5-the-product-life-cycle.md) - [4.3.6 Extending Existing Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-6-extending-existing-products.md) - [4.3.7 New Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-7-new-products.md) - [4.3.8 Benefits and Risks of New Products](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-8-benefits-and-risks-of-new-products.md) - [4.3.9 Promotion](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-9-promotion.md) - [4.3.10 Public Relations and Sales Promotion](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-10-public-relations-and-sales-promotion.md) - [4.3.11 Sponsorship & Social Media](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-11-sponsorship-and-social-media.md) - [4.3.12 Product Placements](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-12-product-placements.md) - [4.3.13 Promotional Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-13-promotional-mix.md) - [4.3.14 Place](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-14-place.md) - [4.3.15 Place 2](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-15-place-2.md) - [4.3.16 Place 3](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-16-place-3.md) - [4.3.17 M-Commerce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-17-m-commerce.md) - [4.3.18 Benefits & Drawbacks of M-Commerce](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-18-benefits-and-drawbacks-of-m-commerce.md) - [4.3.19 End of Topic Test - Marketing Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-19-end-of-topic-test-marketing-mix.md) - [4.3.20 Grade 9 - Marketing Mix](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-20-grade-9-marketing-mix.md) - [4.3.21 Diagnostic Misconceptions - Decreasing Price](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-21-diagnostic-misconceptions-decreasing-price.md) - [4.3.22 Diagnostic Misconceptions - Advertise vs Promote](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-22-diagnostic-misconceptions-advertise-vs-promote.md) - [4.3.23 Diagnostic Misconceptions - Social Media](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/4-3-23-diagnostic-misconceptions-social-media.md) ### 5 Business Operations - 5.1 Economies & Diseconomies of Scale - [5.1.1 Economies of Scale](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-1-1-economies-of-scale.md) - [5.1.2 Diagnostic Misconceptions - Economies of Scale](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-1-2-diagnostic-misconceptions-economies-of-scale.md) - 5.2 Production - [5.2.1 Production Processes](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-1-production-processes.md) - [5.2.2 Flow and Batch Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-2-flow-and-batch-production.md) - [5.2.3 Production Efficiency](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-3-production-efficiency.md) - [5.2.4 Technology & Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-4-technology-and-production.md) - [5.2.5 Diagnostic Misconceptions - JIT vs JIC](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-2-5-diagnostic-misconceptions-jit-vs-jic.md) - 5.3 Factors of Production - [5.3.1 Factors of Production](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-3-1-factors-of-production.md) - 5.4 Quality - [5.4.1 Importance of Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-1-importance-of-quality.md) - [5.4.2 Identifying Quality](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-2-identifying-quality.md) - [5.4.3 Total Quality Management](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-3-total-quality-management.md) - [5.4.4 End of Topic Test - Operational Decisions](https://senecalearning.com/en-gb/revision-notes/igcse/business/edexcel-igcse/5-4-4-end-of-topic-test-operational-decisions.md)