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 in nature.
With business loans, entrepreneurs can address any liquidity crunch, whether for asset financing, business expansion or diversification, etc. Taking a loan also acts as a charge against profits, thus lowering the business’s tax liability.Bajaj Finserv offers loans for entrepreneurs up to Rs. 80 lakh at attractive interest rates with no collateral requirement. These loans have a hassle-free application process, and only two documents are required.
2. Owners’ Equity
Owners’ equity refers to business funds that entrepreneurs themselves provide. However, this can be risky as the business owner puts his funds on the line. Such a source may not suffice for funding. Unlike debt funding, it also 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.
Frequently asked questions
Entrepreneurs can secure funding from various sources, including personal savings, business loans from Bajaj Finance, venture capital, crowdfunding, grants, and angel investors, to kickstart or grow their businesses.
Entrepreneurial finance encompasses various funding types such as equity financing (selling shares or ownership), debt financing (loans), bootstrap financing (using personal funds), and alternative financing methods like crowdfunding or peer-to-peer lending.
Finance is an important aspect of entrepreneurship. It fuels business ideas, funds development, and supports growth. Entrepreneurs must manage and secure finances wisely, as financial decisions significantly impact a venture's success and sustainability.