（a）Explain four sources of external finance a business could use． Source 1： . . . Source 2： . . . Source 3： . . . Source 4： . . .

Business

IGCSE&ALevel

CAIE

Exam No：0450_s25_qp_23 Year：2025 Question No：3(a)

Answer:

Award 1 mark for each source of external finance (max 4).
Award a maximum of 1 additional mark for each explanation of thesource of external finance.

There are no application marks for this question.
Sources of external finance might include:
- Bank loans
- Bank overdraft
- Grants (or subsidies) from government
- Sale of shares
- Hire purchase
- Leasing
- Trade credit
- Micro-finance
- Crowdfunding
- Mortgage

For example: Bank loan (1) is a fixed sum of money borrowed for a set-period of time / repaid in monthly instalments (1).

Knowledge points:

5.1.1.1. The main reasons why businesses need finance, e.g. start-up capital, capital for expansion and additional working capital

5.1.1.2. Understand the difference between short-term and long-term finance needs

5.1.2.1. Internal sources and external sources with examples

5.1.2.2. Short-term and long-term sources with examples, e.g. overdraft for short-term finance and debt or equity for long-term finance

5.1.2.3. Importance of alternative sources of capital, e.g. micro-finance, crowd-funding

5.1.2.4. The main factors considered in making the financial choice, e.g. size and legal form of business, amount required, length of time, existing loans

5.1.2.5. Recommend and justify appropriate source(s) of finance in given circumstances

（a）Explain four sources of external finance a business could use． Source 1： . . . Source 2： . . . Source 3： . . . Source 4： . . .

Answer:

Knowledge points:

Solution:

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