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Finance refers to sources of money for a business. Firms need finance to:

• start up a business, eg pay for premises, new equipment and advertising
• run the business, eg having enough cash to pay staff wages and suppliers on time
• expand the business, eg having funds to pay for a new branch in a different city or country

New businesses find it difficult to raise finance because they usually have just a few customers and many competitors.

Lenders are put off by the risk that the start-up may fail. If the business does fail, the owners may be unable to repay borrowed money.