Different types of sources of finance

1. Government Engineering College Bharuch
Year : 2019-20
SOURCES OF FINANCE
ENTREPRENEURSHIP (2181923)
Submitted By
160140119013 Chauhan Nitin
160140119014 Chauhan Rushab
160140119015 Chauhan Urvish
160140119016 Chhasatiya Hardik
160140119021 Dhimmer Mihir

2. INTRODUCTION
• Finance is the lifeblood of business concern
• Arrangement of the required finance to each
department of business concern is highly a
complex one and it needs careful decision.
• Sources of finance mean the ways for
mobilizing various terms of finance to the
industrial concern.

3. Classification of sources of fund
SOURCES OF
FINANCE
Period
Long-term
sources (5-10)
● Equity Shares
● Preference Shares
● Debenture
● Long-term Loans
● Fixed Deposits
* Venture capital
Short-term
sources
● Bank Credit (w.c)
● Customer Advances
● Trade Credit
● Factoring
● Public Deposits
● MoneyMarket
Instruments (CP)
Ownership
ownership
source
●Shares capital,
earnings
● Retained
earnings
●Surplus and
Profits
Borrowed
capital
● Debenture
● Bonds
● Public deposits
●Loans from
Bank and
Financial
Institutions.
Generation
Internal source
●Retained
earnings
●Depreciation
funds
● Surplus
External
sources
● Share capital
● Debenture
● Public deposits
●Loans from
Banks and
Financial
institutions
9/29/2018 12:14 PM Sources of finance
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4. SOURCES OF FINANCE
 Issuances of shares.
 Loans from commercial banks.
 Venture capital
 Financial Institutions.
 Bridge financing.
 International funds.

5. ISSUANCE OF SHARES
 The captial generated by issuance of shares is known as share capital. The
capital of a company is divided into small units called shares. Each share has
its nominal valve.
 There are two types of shares which are normally issued by a company.
1. Equity shares.
2. preference shares.
 The money raised by issue of equity shares is called equity share capital.
 The money raised by issue of preference shares is called preference share
capital.

6. DEBT FINANCING
 In debt finance, debentures are issued in different denominations at different
interest rates.
 The investors in debentures are paid certain fixed percentage of interest. The
investor are not becoming the owner of the business, so there is no dilution of
control.
 Debentures are preferred as more easy way to get finance although it is a
burden on the company.
 In debentures the interest is considered as expense compared to profit after
tax.

7. LOANS FROM COMMERCIAL BANKS
 They provide funds for different purposes ass well as for different time
periods.
 Banks provides different types of loans to business for different sizes and of
all sizes and in many ways, like overdrafts, term loans, cash credits,
purchase/discounting of bills, and issue of letter of credit.
 The rate of interest charged by banks depends on various factors such as the
characteristics of the firm and the level of interest rates in the economy.

8. VENTURE CAPITAL
 Venture capital is significant innovation of 20th century. It is generally consider
as synonym of risky capital.
 Venture capital is new services, the emergence of which wants towards
developing strategies to help a new class of new entrepreneurs to translate
their business ideas into realities.
 Venture capital is “ equity support to fund a new concepts that involve a
higher risk and at the same time, have a high growth and profit”
 New business investing
 Risky investment
 Not creditor, but become partner.
 Continuous involvement.
 Objective : Not to get interest, but Capital
gain.

10. FINANCIAL INSTITUTIONS
 Various central government and state government financial institutions are
major sources of finance for a new venture. These institutions are providing
funds to the entrepreneurs based on their strength of the business models.
 The most difficult part is to satisfy them in terms your business model in
terms of technical, economical, commerical, managerial ability of your
proposed management, marketing and every aspect of the business.
 Based on reviewing all facts of the business the authority provides the fund at
certain percentage of fixed interest rates.

12. BRIDGE FINANCING
 Bridge financing is short-term financing aimed to provide funds to
companies until they obtain long-term financing.
 Bridge loans are expensive, given the risks associated with such types of
loans.
 Equity bridge financing represents an exchange of capital from the
lender’s side for an equity stake in a company from the borrower’s side.

13. INTERNATIONAL FUNDS
 International funds are equity funds that invest in stocks of companies listed
outside of India. These funds help you invest in some of the biggest
companies in the world.
 International Funds are usually preferred by those investors who want to
invest in securities beyond domestic stocks and across geographical barriers.