Syllabus: Cambridge - IGCSE Business Studies
Module: 5.1 Business Finance: Needs and Sources
Lesson: 5.1.2 The Main Sources of Finance

Introduction

This article supports the delivery of Cambridge IGCSE Business Studies (0450), specifically Section 5.1.2: The Main Sources of Finance. It aligns with the official Cambridge syllabus, which expects students to understand both short- and long-term sources of finance and their suitability for different business contexts.

As financial literacy becomes central to workplace readiness and commercial awareness, this topic helps students build practical decision-making skills and prepares them for careers across sectors. It also supports Gatsby Benchmark 4 by linking curriculum learning directly to real-life career decisions.

Key Concepts

Students are expected to know and understand:

• Short-term sources of finance, including:

  • Overdrafts

  • Trade credit

  • Debt factoring

• Long-term sources of finance, such as:

  • Bank loans

  • Hire purchase

  • Leasing

  • Issuing shares (for limited companies)

  • Debentures

  • Venture capital

  • Retained profit

  • Sale of assets

• The suitability of each source depending on:

  • The type of business (sole trader, partnership, limited company)

  • Purpose of finance (start-up, expansion, working capital)

  • Cost, availability, and control implications

The Cambridge IGCSE specifically encourages analysis of appropriateness, not just memorisation of definitions. This is where applied examples and critical evaluation are key.

Real-World Relevance

Finance decisions affect businesses daily. Consider:

• Gymshark, the fitness apparel company, started using retained profits and reinvestment before securing equity funding to scale. They delayed external finance until proving their model.

• Local cafés might rely on overdrafts or trade credit to cover short-term supplier payments, especially in seasonal low periods.

• Tesla, while a global name, has repeatedly raised capital by issuing new shares, diluting ownership in return for long-term funding for innovation.

Bringing such examples into the classroom ensures students connect theoretical finance with real-world decision-making and career awareness.

How It’s Assessed

In the Cambridge IGCSE examination, this topic typically appears in:

• Short answer questions: e.g. “State two short-term sources of finance.”

• Data response questions: where students apply understanding to a business scenario.

• Extended writing (6- or 8-mark questions): evaluating the best finance option given a specific business context.

Common command words include:

• Identify

• Explain

• Justify

• Evaluate

Mark schemes reward application and justification over rote listing. For example, simply naming “bank loan” gains less credit than evaluating its cost and control implications for a start-up.

Enterprise Skills Integration

This topic naturally develops decision-making and problem-solving skills, both central pillars of the Enterprise Skills framework.

In our Skills Hub Business platform, students can access simulations where they must choose finance sources to fund a business pitch or respond to unexpected costs—building real commercial literacy through applied practice.

Activities like ‘Finance Match-Up’ (matching scenarios to finance sources) or mock boardroom decisions engage students in evaluating trade-offs—mirroring real workplace behaviours.

Careers Links

Understanding finance prepares students for roles in:

• Accounting

• Finance and Banking

• Operations and Logistics

• Entrepreneurship

• Public sector roles (e.g. school finance officers, NHS procurement)

Mapped against Gatsby Benchmarks 4, 5 and 6, this topic connects curriculum to careers through:

• Real company case studies (Benchmark 4)

• Employer challenges in Skills Hub tools (Benchmark 5)

• Simulated workplace decisions with financial consequences (Benchmark 6)

Teaching Notes

Tips for Delivery:

• Use case studies: Compare finance needs of a sole trader vs a limited company.

• Include debate activities: “Should a business lease or buy equipment?”

• Run a class simulation (from Skills Hub Business): let teams pitch for investment using different finance sources.

Common Misconceptions:

• Students often mix up overdrafts with bank loans.

• Many assume issuing shares is available to all businesses, not just limited companies.

Extension Opportunities:

• Ask students to research a local business and identify potential sources of finance.

• Set up a finance-focused mini-project where students plan a pop-up event, including a financing strategy.

Useful Tools from Enterprise Skills:

• Skills Hub Business: Curriculum-aligned finance tools

• Skills Hub Futures: Careers-based modules linking finance to workplace roles

• Break-even calculator and Business report builder to model financial impact.