Source of Financing Entrepreneurship- Entrepreneurial Sustainability Video Lecture | Entrepreneurship & Small Businesses - B Com

financing is needed to start a business
and ramp it up to profitability there
are several sources to consider when
looking for start up a business but
first you need to consider how much
money you need and when you will need it
the financial negative for business will
vary according to the type and size of
business for example processing
businesses are usually capital intensive
requiring large amount of capital retail
businesses usually require less capital
a general question might come in your
mind that why businesses need money
money is required to buy the premises
and equipment to start a business money
is essential as initial expenditure to
find continuously business activities
and money for flowing to expand the
business next nest idea what are the
sources of funds in general a business
may have two major sources of funds
which are needed for its business
operation they are internal sources of
fund and external sources of fun the
internal sources has been divided into
three parts which are profit
depreciation and sales of assets firstly
profit is the after-tax profit on and
retained by a business which is an
important end in is inexpensive source
of finance for example the retained
earning of the business a large part of
Finance is funded from profit
depreciation the financial provision for
replacement of worn-out machinery and
equipment nearly all businesses uses
depreciation as a source of funds sales
of assets are those activity that of
business sales of assets to raise the
fund for a business
the external sources of fun are
short-term and long-term which are
further classified as in external
long-term sources of fun include share
capital it is for limited company it is
often considered as permanent capital as
it is not repaid by the business but the
shareholder can have the share in the
profit which is called as dividend there
are three types of shares these are
ordinary shares preference shares and
default shares the ordinary shares are
the most common type of share and most
risky share since no guarantee of
dividend preference shares owner
receives a fixed rate of return they
carry less risk because of shareholder
are entitled to the dividend before the
ordinary shares default shares are often
held by the founders of the company
another external long-term sources is
known which is a money which is borrowed
for long period of time by a business or
which is called as loan capital there
are four major type of loan capital
these are debentures mod cash loan
specialist funds and government
assistance let's look at these
subcategory in detail the benchers the
holder of a debenture is a creditor of
the company not an owner holders are
paid with the agreed fixed rate of
return but having no voting rights
mortgage these are long-term bank loans
from banks or from other financial
institutions loan specialist funds these
are venture capitalists or specialists
who provide fund for small businesses
especially for high tech investment
project in their startup stage there are
also individual who invest in such
businesses which are often called as
base
angels government assistance to
encourage small businesses and high
employment Gorman may be involved in the
providing finance for the business as
discussed before external source is
divided into two parts another subpart
is short-term sources which are bank
overdraft bank loan leasing credit cards
and trade credits these sources of funds
are the funds which are less than one
year for maturity they are less stable
sources of fund for businesses bank
overdraft is the amount to be overdrawn
depends on the need of business at the
time bank loan is a loan which requires
a rigid agreement between the borrower
and the bank the amount borrowed must be
repaid over a certain period or in
regular installments leasing allow
business to buy a plant machinery or
equipment without paying large sum of
money immediately depth financing
involves borrowing fund from creditors
with the stipulation of repaying the
borrowed fun plus interest at a
specified future time for the creditor
the reward for providing the debt
financing is the interest on the amount
lent to the borrower Gorman program
federal state and local government hub
program designed to assist the financing
of new venture and small businesses a
lease is a method of obtaining the use
of asset for business without using
depth or equity financing it is legal
agreement between two parties that
specify the term and condition for the
rental use of tangible resources such as
building and equipment knowledge
understand factors affecting the choice
of funds these factors are caused to
fund
purpose of funds status and size of
businesses financial situation of
perform cost of fund in terms of
interest payment and other expenses
long term and short term purpose of one
such as building of a new plant is
usually financed by mortgage or share
capital while the purchase of raw
material by trade credit or bank / job
status in size of businesses it is for
long form there are more sources of
finance and often with the lower
interest rate financial situation of a
phone a business in who will financial
situation is forced to pay high interest
rate for loans and the bank often
requires security or collateral for
their financing other sources are def
financing involved borrowing funds from
creditors for the creditors the rebar
for providing the debt financing is
interest on the amount lent to the
borrower debt financing may be secured
and unsecured secured apt had collateral
consequently unsecured debt does not
have collateral and places the lender in
a less secure position equity financing
means exchanging a portion of the
ownership of the business for a
financing investment in the business the
ownership stake resulting from an equity
investment allow the investor to share
in the capital's profit equity involves
a permanent investment in a company and
it is not repaid by the company at the
later date you can see the pictures for
better understanding where equity and
depth are fundamental sources of fun
let's look at the comparison between the
two sources the comparison is made on
the basis of maturity claimed on
assessment and income and right to a
voice in management thank you