Bank Overdraft Interest On A Business example essay topic

422 words
Part 1 Business and finance 1. If you want to buy an existing business you have to pay some extra money to recognise the work done by the previews owners, the existing costumer base and the reputation of the business. The combined value of these represents goodwill. 2. The purchase of stock- trade credit is probably the best option but a bank overdraft could be used. Renovations that will cost $50,000- a 5-10 year business loan is probably the best option.

The purchase of a car for a business- leasing or a 5-10 year business loan or equity finance are all possible options. Additional food and a range of house wines- trade credit would be the best option but a bank overdraft could be used. Furniture costing about $2,000- a bank overdraft would be the best option but equity finance could be used. Wages for a part time employee- a bank overdraft would be a good option. Trade credit- Advantages- 60 days to pay but use of the stock now and no interest is payable provided you pay within 60 days. Disadvantage- if you pay later than 60 days you have to pay interest.

5-10 year business loan Advantage- gives you time to pay the loan off Interest is lower compared to a bank overdraft Interest on a business is a tax deduction to a business Leasing Advantage- it only requires a little amount of money initially payment made while there goods are being used, high interest costs can be claimed as a taxable deduction. If you have any repairs then you don't have to pay for it. Disadvantage - the lease payment are high but at the end of the lease payment you have a choice of buying the asset it. You have to pay interest on lease payments.

Bank overdraft- you have the ability to overdraw unestablished bank accounts. Advantage - its convenient and easy Disadvantage- the interest rate then longer-term loans. 3. If you want to apply for a business loan you need to set up a full business plan and also show that you can repay the loan. Also show business and personal financial records you need to pay security in cash. 4. costs associated with a long- term business loan of 25 years Establishment fee 820 Interest 6.8 Monthly fee 8.00 per month Banks gives you 95% of the loan to help you.

Evaluation Government fees.