Syllabus: OCR - GCSE Business
Module: 5. Finance
Lesson: 5.2 Sources of Finance

Introduction

The OCR GCSE Business specification includes a focused section under Unit 5: Finance, titled 5.2 Sources of Finance. This topic is not just about listing financial options — it develops decision-making and evaluative thinking that students will carry forward into exams and beyond. Students explore how businesses select appropriate sources of finance depending on their size, structure, and purpose.

This unit supports learners in understanding real financial decisions faced by start-ups and established firms. It helps students think practically about risk, return, control, and short- vs long-term needs — all of which connect clearly to exam questions and business reality.

Key Concepts

Students should be able to:

• Identify and describe a range of internal and external sources of finance, including:

  • Internal: retained profit, sale of assets

  • External: bank loans, overdrafts, trade credit, share capital, venture capital, and crowd funding

• Distinguish between short-term and long-term finance

• Analyse advantages and disadvantages of each source depending on:

  • Type and size of business

  • The purpose of the finance (e.g. start-up, expansion, cash flow management)

• Apply understanding to context-based scenarios (e.g. choosing the right source for a specific situation)

Students are also expected to weigh up trade-offs, such as loss of control vs increased funding, or interest payments vs speed of access.

Real-World Relevance

Students are surrounded by examples of businesses raising finance — from Dragons’ Den pitches to local news stories of small firms using crowdfunding to expand.

Mini Case Example:
“The Honest Crust”, a small pizzeria in Manchester, funded its second site via crowdfunding after banks turned them down. The campaign not only raised £100,000, it also built a loyal customer base before the site opened.

Another example:
Gymshark’s early growth was funded by retained profits and later a strategic investment from a US private equity firm — not bank debt. This helped them retain control and scale globally.

Encouraging students to follow stories like these helps them apply their understanding and builds financial fluency.

How It’s Assessed

OCR GCSE Business assessment uses multiple formats, including:

• Multiple choice and short answer: recalling and defining sources of finance

• Data response: interpreting business scenarios and suggesting appropriate finance options

• Extended response questions: analysing and evaluating finance choices

Key command words to prepare for:

• Explain: Define and give examples

• Analyse: Provide a logical chain of reasoning (e.g. cause and effect of choosing a source)

• Evaluate: Weigh options, offer a judgement, and justify a recommendation

Example question:

“Recommend an appropriate source of finance for a small business looking to buy new equipment. Justify your choice.”

This calls for application, comparison, and a supported decision — not just knowledge.

Enterprise Skills Integration

This topic supports active learning through role play, simulation, and group work. Key skills developed include:

• Problem-solving: Deciding between finance options with different costs and risks

• Decision-making under pressure: Justifying choices when faced with limited or conflicting information

• Critical thinking: Weighing up opportunity cost, future implications, and stakeholder views

Enterprise Skills Business Simulations offer students a chance to make real-time financial decisions within fictional business contexts — from choosing a loan to managing overdrafts during downturns. These experiences deepen understanding far beyond passive recall.

Careers Links

This topic supports Gatsby Benchmarks 4, 5, and 6 by making clear links between classroom content and future employment:

• Finance roles: Accountants, financial advisors, finance assistants

• Enterprise pathways: Entrepreneurs, start-up founders, operations managers

• Apprenticeships: Business Administration, Accounting, Finance and Retail

Encourage students to research how real businesses finance themselves, or bring in a local entrepreneur or bank advisor for an employer encounter (Benchmark 5).

Skills learned here also apply to personal finance, budgeting, and decision-making — valuable for all students, regardless of career path.

Teaching Notes

Tips for delivery:

• Use comparison tables to help students weigh up pros/cons across options

• Frame activities around real decisions — e.g. “Your class runs a pop-up café: how would you fund equipment?”

• Reinforce vocabulary and distinctions early (short vs long-term, internal vs external)

Common pitfalls:

• Confusing internal with external sources (especially sale of assets vs trade credit)

• Assuming cheapest is always best — students must consider suitability

Extension ideas:

• Run a Dragon’s Den-style pitch session where students must justify their chosen finance route

• Analyse case studies using financial news sites or small business blogs

• Link to spreadsheet skills by modelling interest repayments over time