Evaluate the various methods of financing business

In order to answer this question, it is worth laying out the different methods of financing a business. These can be short term (overdraft, trade credit, factoring) or long term (share capital, loans from friends/family, debentures, grants, mortgage, leasing). Once you have learnt these you will then need to select the ones that you are most confident talking about. You will then need to discuss the pros and cons of each selected. For example, you may speak about how a family loan is useful because they may charge you very little (if any) interest). However, you could mention that a loan from family may put pressure on your personal relationship because you are in debt to them. Another example may be share capital. You could mention how it would require you to give up ownership in your business, but that the finance would be raised fast. Having discussed the pros and cons and in order to gain 'higher level' marks, you will need to include some evaluation. For example, you could say how it depends largely on the stage of growth of the company. If this is a start up company, it may have little retained profits and so this may not be a financing option. But, it may be entitled to government grants. To further this evaluation, you could bring in come current topical knowledge. For example, the government is currently trying to promote technology start up businesses and therefore if this is a start up business it may be able to get a large grant. As a final sentence, it is important to state which method of financing you think is best under certain conditions - you could say, for example, if interest rates are low then a bank loan is is the best method of finance.