Sources of Capital

Sources of Capital

Entrepreneurs are the persons who start up their own business with capital which may be their own savings or borrowed funds . Generally entrepreneurs are sole proprietors or start up as partnership firms with few partners who pool their funds together for the business . Capital is needed for conducting any kind of business

The sources of capital are

Self-finance- The owner of the small business may invest its own cash (personal savings , or take loan against assets available with him

Loans - The loans available for a business are of

two types secured loans and unsecured loans . The secured loans are those which are granted against some collateral security where as the unsecured loans do not require any security

Banks-Most of the businesspersons seek loan from the banks as the banks have low interest rate and longer periods for payback . The banks offer loans for short term or long- term as stated by the applicant against a security or mortgage . Some banks may require the owner to deposit the proposed business plan for which loan is being taken . This is most common when the business-owner is a newly starting or investing in the small business . They may also ask for the previous year 's financial statements if the firm has already in operation in to satisfy that the borrower can repay the funds in time

Loans from friends and relatives- Some business-persons take loans from their friends and relatives who provide them it at low interest . Such persons...