What are the sources of entrepreneurial finance?

The sources of finance for entrepreneurs can be broadly classified into two categories:

1. External funding

Entrepreneurs can take loans that are either short-term, medium-term, or long-term. A substantial amount of entrepreneurial finance comes from loans. With this source of funds, entrepreneurs can address any liquidity crunch at times of asset financing, business expansion or diversification, etc. Taking debt also acts as a charge against profits and thus, lowers your business’ tax liability.

Bajaj Finserv offers Loans for Entrepreneurs up to Rs.30 lakh at attractive interest rates with no collateral requirements. These loans have a hassle-free application process and only 2 documents needed to avail finance.

2. Owners’ Equity

Owners’ equity refers to the business funds that are provided by entrepreneurs themselves. However, this source can prove to be risky as the business owner puts his personal funds on the line. Such a source may also not suffice for funding and unlike debt funding, it increases the tax payable by the company as dividend on equity is an appropriation of profits i.e. it doesn’t get deducted while calculating the net profits of the company on which tax liability is calculated.