SOURCES OF FUNDING

DONE BY: MORTEZA

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LEARNING OBJECTIVES
Various sources of finding in any company

INTRODUCTION
It

is rightly said that finance is the life-blood of business. No Business can be carried on without source of finance . There are several sources of Finance and as such the finance has to be raised from the right kind of source.
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Private funds

Some people are in a fortunate position of having some money which they can use to help set up their business. The money may be the result of savings, money left to them by a relative in a will or money received as the result of a redundancy payment. This has the advantage that it does not carry with it any interest. It might not, however, be a large enough sum to finance the business fully but will be one of the contributions to the overall finance of the business

Internal accruals
This is a source of finance that would only be available to a business that was already in existence. Profits from a business can be used by the owners for their own personal use or can be used to put back into the business. This is often called laughing back the profits'. This finance can be used to buy new equipment and machinery as well as more stock or raw materials and hopefully make the business more efficient and profitable in the future.

Bank loan
A Business enterprise requires short-term and longterm finance. It may raise financial resources by raising short-term loans and long-term loans.
Short-term Sources. Long-term Sources.

Angel investors
Private investors who invest in emerging entrepreneurial companies. Fastest growing segment of the small business capital market. An excellent source of patient money for investors needing relatively small amounts of capital ranging from $100,000 (sometimes less) to as much as $5 million.

Angel investors
An estimated 230,000 angels across the U.S. invest $23 billion a year in 50,000 small companies. Their investments exceed those of venture capital firms, providing more capital to 17 times as many small companies.

Angel investors
The typical angel:
Invests in companies at the seed or startup stages. Accepts 10 percent of the proposals presented to him. Makes an average of two investments every three years. Has invested an average of $80,000 in 3.5 businesses. 90 percent are satisfied with their investments.

Key: finding them!

Network! Look nearby, a 50- to 100-mile radius. Informal angel clusters and networks
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venture capital

Venture capitalists are groups of (generally very wealthy) individuals or companies specifically set up to invest in developing companies. Venture capitalists are on the look out for companies with potential. They are prepared to offer capital (money) to help the business grow. In return the venture capitalist gets some stakes in the running of the company as well as a share in the profits

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Corporate Venture Capital

20 percent of all venture capital investments come from corporations. About 300 large corporations across the globe invest in start-up companies. Capital infusions are just one benefit; corporate partners may share marketing and technical expertise.

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Venture Capital Companies

More than 1,300 venture capital firms operate across the U.S. Most venture capitalists seek investments in the $3,000,000 to $10,00,000 range in companies with high-growth and high-profit potential. Business plans are subjected to an extremely rigorous review - less than 1 percent accepted.

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Venture Capital Companies

Most venture capitalists take an active role in managing the companies in which they invest. Many venture capitalists focus their investments in specific industries with which they are familiar. Venture capitalists typically purchase between 20 percent and 40 percent of a company but in some cases will buy 70 percent or more.

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Venture Capital Companies

Most often, venture capitalists invest in a company across several stages. On average, 98 percent of venture capital goes to:

Early stage investments (companies in the early stages of development). Expansion stage investments (companies in the rapid growth phase).

Only 2 percent of venture capital goes to businesses in the startup or seed phase.
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thanks

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