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Advantages of Internal Sources of Funds
i) Due to the personal attachment one has to his finances, the funding is committed
to the business and the intended projects.
ii) You will not have to keep up with costs of servicing bank loans or debt finance,
allowing you to use the capital for business activities.
iii) It allows you to be in full control of your business without external interference
iv) It reduces bureaucracy in decision making
Disadvantages of Internal Sources of Funds
i) Raising internal finance is demanding, costly and time consuming, and may take
management focus away from the core business activities.
ii) Business growth is limited due to the limited nature of internal funds
iii) Often profits are not viable as a source of funds as the firm may have paid the
profit in dividend to the shareholders, or perhaps already tied the money up for
other reasons.
iv) One may loose personal property if he used it to raise capital and the business
goes down
Kavungya answered the question on March 26, 2019 at 06:44