Unit 2 Managing Financial Resources and Decisions (GC01320)

Introduction

Making effective decisions and managing financial resources are essentials to gain business organizational goals and objectives. This paper conducts a study on how to manage financial resources and decisions for a business. The chosen business here is Clairton Antiques Ltd. The financial resources, their importance and implications are discussed in the first section. In the second section,

Overview of chosen overview

Clarion Antiques Ltd was established five years ago by four associates. It is beginning as an unincorporated industry as well as has developed gradually or progressively, and has improved an excellent status for purchasing traditional things. It has 2 parts in London as well as is appearing to get a shop in Birmingham to open other division. They would want to increase £0.5 million. This company is now thinking to maximize its business. Therefore, it is now looking for loans or venture capital as financial sources to maximize its business (Clairton Antiques Ltd, 2016),

Task 1

1.1 Identify the sources of finance available to a) unincorporated business; and b) incorporated business.

Sources of finance for an unincorporated business

Personal Savings: personal saving is one of the key financial resources for backing a company is the entity savings of every partner. Individual partners in the business may give an equivalent quantity of their own finances into running or starting the industry (Broadbent and Cullen, 2013). Other company contracts create every associate accountable for a definite proportion, thus one associate may give 20% of the finances vital to run or start the business.

Bank loan: An unincorporated can also take help from the bank by taking a loan to invest in the business. As Broadbent and Cullen (2013) note, the owner of banks can look for short or long-term loans as financial sources. In this case, the approval of these loans depends on the performance of the business. For example, if a partner has 20% possession in the business, subsequently this partner is accountable for reimbursing 20% of the loan extracted for the companies.

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Credit card: A business is also qualified to use for a company credit line. Broadbent and Cullen (2013) said, credit can be an easy-way financial source but it may have high interest that may affect business performance. Therefore, unincorporated businesses can take loans but should only use in emergency cases.

Additional Partners: new partners can be added to finance within the business. Broadbent and Cullen (2013) stated that these associates can be existing associates or quiet associates. Existing associates can provide their personal capital in the company as well as have a say in the action of the company. Quiet associates are like shareholders, where they provide their capital in the business, however, they are not engaged in the everyday actions.

Funds from family and friends: The owner of businesses can seek finance from relatives, family members and friends to invest within the business. According to Broadbent and Cullen (2013), the holder of the company can inspire the family or friends to provide in the company.

Sources of finance for incorporated business

A number of financial sources can be defined for incorporated businesses that are outlined as follows.

Bank loans: Broadbent and Cullen (2013) said bank loan can be one of the effective sources of finance for an incorporated business. The bank loan can be formed as a long-term loan or short-term form. However, approval of a bank loan depends on the business performance.

Bank overdraft: bank overdraft is also an easy way to process as a financial source. Broadbent and Cullen (2013) said an incorporated business can apply for a bank overdraft to finance and maximize business operation. However, the lenders look for business performance to approve an overdraft.

Share capital: the incorporated businesses can take the help of share capital to invest and finance of its business. In this case, it is essentials for incorporated businesses to go on the stock exchanges and should offer their shares to the general public. This is one of the effective sources of finance because of low risk and no interests need to be provided (Broadbent and Cullen, 2013).

Leasing: The incorporated business can also do leasing as a financial source to maximize its businesses. In this case, the company can lease properties and other materials from any leasing company. The company can conduct an agreement on paying an amount over a certain time period (Broadbent and Cullen, 2013).

Working capital: Short-time capital can be short-term money that can be used as working capital. This form of financial source can play a significant role to meet the regular expenses of a business such as employee salaries and wages, electricity bills, rents, and daily expenses (Broadbent and Cullen, 2013).

Hire purchase: it can be a source for an incorporated business. The incorporated business can hire any particular types of equipment or machinery from third parties. In this case, a particular contract or agreement can be done for payment options and returning the equipment or machinery (Broadbent and Cullen, 2013).

Sales of business assets: the incorporated business can sell its particular assets and arrange finance to invest in the business. However, it may affect the performance of the business. Therefore, the incorporated business should do effective analysis before selling any business assets (Broadbent and Cullen, 2013).

Retain earning: retained earnings can be a source of finance that can be arranged from the business profits. The owners or partners of the business can save the business profits as retained earnings and can reinvest in the business. The business can use this kind of finance for marketing, advertising and business operations (Broadbent and Cullen, 2013).

Additional partners: the incorporated businesses can look for additional partners to arrange finances for businesses. In this case, the business can do particular terms and agreements for partnerships. This can be a safe source of finance because the partners share profits and losses of business (Broadbent and Cullen, 2013).

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