7 Sources of funding for entrepreneurs | You Must Know


An entrepreneur is a person who sets up his business, takes risks, and earn profit from it. But sometimes even entrepreneurs seek fundings for their new projects. So, i have got all of them together and listed the sources of funding for entrepreneurs.

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7 Sources of funding for entrepreneur


The various sources from which the entrepreneur can get funds are:


Long term financial instruments


Long term finance is required to buy fixed assets. That is why they are also called instruments of fixed capital.


The Following are given below,

 Equity Share Capital:

Such shares which are not predecessor shares are called equity shares.

In other words, equity shareholders have the right to receive dividends and capital in case of liquidation after preference shareholders.

The holders of such shares are legally the owners of the company.

 Preference Share Capital:

Preference shares enjoy preference in both dividend payment and capital return in case of liquidation compared to equity shares.

Term loan :

Enterprises get long-term loans mainly from term loans.

The term loan is repaid within ten years. Financial institutions provide both Indian currency term loans and foreign currency term loans.


Short-term financial instruments


Finance is also necessary for daily business activities. So, even you can look for sources of funding for entrepreneurs who have a small business.


In other words, short-term finance is essential to meet the working capital requirements of the enterprise.


Hence, such means of finance are also called working capital advances.


Some of the short term resources are:


Bank instrument

 Cash credit
 Overdraft
 Encashment of bills
 Letter of credit


Non-bank instruments

 Business credit
 Business letter
 An advance payment from customers


Angel funder/ seed investor


Angel investors are people who want to invest in the initial stages of a startup.


Therefore, most of the funders have sufficient funds available with them.


They are looking for substantial returns from the traditional investment methods.


Also, angel investors have easy terms as compared to other lenders.


Above all, they typically want 20% to 25% return on the money they invest in your company.


Crowdfunding


It is currently the trendiest sources of funding for entrepreneurs.


Crowdfunding refers to a practice where money is taken from a group of people to complete a project.

Therefore, whoever invests their money knows very well where and why they are investing. Usually, it is only for a particular cause.


Types of crowdfunding:

 Reward
 Equity
 Debt-based
 Litigation
 Donation-based


Government funding


There are more than ten popular business startup loan schemes that the government offers.

Following are some of the best government loan schemes for starting a business:

 Mudra loan
 Startup India
 PSB Loan
 SIDBI Make in India Soft Loan Fund (SMILE) for MSME


Mutual funding


A mutual fund is the most common pool of money.


This investment replaces the contribution to invest in different types of securities as per the stated objectives.


Why entrepreneur look for sources of fundings:

 Fresh start a business
 Increase visibility
 To attract attention in the market
 Expanding their business


Conclusion


The entrepreneur needs a durable and long-drawn-out loan for stable business capital.


However, all sources of money matters are broadly dissociating into equity capital and debt capital.


Equity refers to the finance received from the shareholders. On the other hand, the loan is prevailing from outside parties.


The entrepreneur is very courageous, who participates in the development of society. That's why sources of funding for entrepreneurs have a vast variety to choose from according to requirements.


An entrepreneur also employs other persons to grow his industry. As a result, unemployment prevailing in the community also gets rid of to some extent.


So we can say that an entrepreneur is a person who takes other people along with him. He takes care of his interests as well as the interests of others. Not every


Businessman can be an entrepreneur. An entrepreneur follows every rule of business well and increases the growth of his business day by day.

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