Funding sources for business

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2020-07-02 22:43:07

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One of the ways of ensuring entrepreneurship is financing. Will there be implemented a project for development and establishment depends on whether found the funds.

The funding Sources are divided into two large groups: internal and external. Under the first understand the flow of funds obtained from entrepreneurial activities, i.e., equity of the company. The composition of these material values include:

  1. Authorized (formed at the expense of own funds of the founders of the enterprise in its organization);
  2. Incremental (formed after the revaluation of fixed assets);
  3. Reserve capital (created by the result of continuous contributions from the profits of the enterprise for unexpected expenses).

Proceeds from the sale of goods or property, rendering services, profits from the sale of shares of the company, to obtain payment for the lease of equipment or real estate – are all internal sources of funding. However, invest its own funds in long-term projects can afford only large companies with enough free cash.

The Financing, which used own funds, has a number of advantages:

  • Improve financial stability;
  • Stable formation and rational use of monetary funds;
  • Lack of complexity in management decisions, as it is known in advance, the sources of which will be covered the additional costs;
  • The cost of external financing is minimized.

External sources of Finance is divided into debt and uncompensated. Grant – charity, subsidies, grants, donations, etc., and debt – debt capital.

The last part:

  1. Accounts payable;
  2. Short-term loans and credits;
  3. Long-term borrowings.

The external sources include public financing, and funds obtained from financial and credit enterprises, non-financial entities or citizens. The search for such material investments in the business can be carried out in different directions. If the company is engaged in the development of new technologies, it fits the venture financing. Funding sources of this type allow a large risk when investing in order to gain a high income. Venture investor provides funds in exchange for a share in the business and constantly monitors the implementation of the project, which he funded. Often specify the conditions for the acceptance of venture capital investor in management decisions.

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You Can use the Bank loan or funds issued by a credit cooperative. These cooperatives are organised by individuals, and may deliver the amount of several hundred thousand rubles. They impose more lenient requirements for borrowers and faster consider the applications, but the interest on the loan are much higher. To find an investor for your business can help state institutions such as the business incubator or an industrial Park. They create the conditions for success for young entrepreneurs.

Choosing sources of financing, it is necessary to maintain the financial balance between raising funds and the preservation of the independence and stability of the enterprise. So excessive attraction of external borrowed funds could undermine the financial stability of the enterprise, and using only internal resources and slow down development. The correct calculation of the financing balance will increase the volume of borrowings and at the same time efficient use of its own accumulated funds.

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