Pearson Edexcel · A-Level · Economics B
Course version: 9EB0 · Version from Sept 2015
C) Other types of finance: o venture capital o share capital o leasing
Full specification wording
Types and sources of credit and the impact of credit within the economy: c) Other types of finance: o venture capital o share capital o leasing
Venture capital involves investment from individuals or firms into early-stage, high-potential, high-risk start-ups, often in exchange for equity and a say in management.
Checked against the Pearson Edexcel 9EB0 specification (opens in a new tab) on .
- Point 3 of 5
- 3 key terms
Study notes
From the checked teaching notes for this specification point.
The idea
Venture capital involves investment from individuals or firms into early-stage, high-potential, high-risk start-ups, often in exchange for equity and a say in management. Share capital is the money raised by a business through the issue of shares to investors, providing long-term funding without the obligation of regular interest payments, though it dilutes ownership. Leasing allows a business to use an asset, such as machinery or vehicles, over a set period in return for regular payments, without the need for a large initial capital outlay.
For example: A delivery firm might lease its vans to preserve cash flow, while a tech start-up might seek venture capital to fund rapid expansion.
What earns the marks
- Identify venture capital as funding provided to high-risk, high-potential start-ups, usually in exchange for equity.
- Recognise that share capital involves raising funds by selling ownership stakes in a company.
- Explain that leasing allows a business to use an asset for a specified period through regular payments without owning it outright.
- Distinguish between the dilution of control associated with share capital and the retention of ownership when leasing assets.
Common mistakes and how to put them right
Confusing venture capital with a standard bank loan.
Put it right: Venture capital usually involves giving up equity and some management control, whereas a loan requires interest payments but no loss of equity.
Assuming leasing means the business eventually owns the asset.
Put it right: Leasing is essentially renting, and ownership usually remains with the lessor unless it is a specific hire purchase agreement.
Believing share capital must be repaid.
Put it right: Share capital is permanent capital and does not require repayment, unlike debt finance.
Exam tips
- When evaluating finance options, always consider the trade-off between losing ownership through share capital and taking on fixed costs through leasing.
- Use the context of the business to justify the type of finance; high-risk tech start-ups are classic candidates for venture capital.
- Remember that leasing improves short-term cash flow by avoiding large upfront capital expenditures.
Try the lesson
The start of the Types and sources of credit and the impact of credit within the economy: c) Other types of finance: o venture capital o share capital o leasing lesson, made from checked teaching notes for this specification point.
Have a go first
Which of the following best describes leasing as a type of finance for a business?
Listen
Venture capital involves investment from individuals or firms into early-stage, high-potential, high-risk start-ups, often in exchange for equity and a say in management. Share capital is the money raised by a business through the issue of shares to investors, providing long-term funding without the obligation of regular interest payments, though it dilutes ownership. Leasing allows a business to use an asset, such as machinery or vehicles, over a set period in return for regular payments, without the need for a large initial capital outlay. For example, a delivery firm might lease its vans to preserve cash flow, while a tech start-up might seek venture capital to fund rapid expansion. A strong answer earns marks for these points. Identify venture capital as funding provided to high-risk, high-potential start-ups, usually in exchange for equity. Recognise that share capital involves raising funds by selling ownership stakes in a company. Explain that leasing allows a business to use an asset for a specified period through regular payments without owning it outright. Distinguish between the dilution of control associated with share capital and the retention of ownership when leasing assets. Exam tip: When evaluating finance options, always consider the trade-off between losing ownership through share capital and taking on fixed costs through leasing.
See it
Key words
Say what each word means before you turn the card.
Venture capital
Try answering aloud or in your head before turning the card.
Share capital
Try answering aloud or in your head before turning the card.
Leasing
Try answering aloud or in your head before turning the card.
See every definition
- Venture capital
- Investment from individuals or firms into early-stage, high-potential, high-risk start-ups, often in exchange for equity and a say in management.
- Share capital
- Money raised by a business through the issue of shares to investors, providing long-term funding without the obligation of regular interest payments, though it dilutes ownership.
- Leasing
- Allows a business to use an asset over a set period in return for regular payments, without the need for a large initial capital outlay.
Label the diagram
Some boxes have lost their names. Pick the right name for each number.
1Box 1
2Box 2
3Box 3
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