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1. Types And Sources of BusinessFinancing taxguru.in/finance/types-sources-business-financing.html A newly incorporated business in any form i.e. whether sole proprietor or partnership or LLP or Companies require funds or finance to grow and run its businesseffectively. The sales (revenue) are the main form of cashflows to the business. Sometimesthe business requires additional funding for future growth and efficiency. Therefore the business approaches for outside finance or funding mainly to Banks/Financial Institution/NBFCs or Angel Investors or Venture Capitalists to fund theirbusiness. Funding is the act of providing resources to finance a need, program, or project.Mainly the finance refers to working capital need or project financing or purchasing of an asset for the business. Therefore, funding of business plays a vital role in its achievement. In this article, we look at the types of funding available forbusinesses. Banks/Financial Institutions: Financing a business through Banks/FI/ NBFCs are the common form of fundingactivity. Banks/FI/NBFCs provide various forms of business financei.e. Secured and unsecuredloans, billsfinance, working capital loans (withoutcollateral), project based loans (projectfinance), creditfacilities, small business loans (SMELoans)

2. Banks have well structured process for providing loans to large businesses acrossthe country. Similarly NBFCs are also a form or corporation which provides loans without much legal requirements as compared to Banks andFI. Angel Investors Angel Investors are another form of business funding or financing. An Angel Investoris an individual which usually funds the business at an early stage with a view togain royalties or equity ownership. These are individuals with high net worth. As theangel investors take a high risk of investing into startups, they desire for a return of approximately 20% of the capital so invested in thebusiness. Venture Capitalists Like Angel investors, Venture Capitalists are also like form of source financing. The Venture Capitalists usually invest in Companies in return for part ownership either inthe form of equity or convertible debentures. These are professional managed funds that have huge potentials. The VCs enter into proper contract or agreement determining the terms and conditions of capital investments and repayment process. VCs are goodfor large businesses looking for high investments. Most of the VCs also act asNominee Director in the companies in which theyinvest. Government Grants & Subsidies Government has come up with various schemes, grants and subsidies for startups who can get their business plans or proposals approved and get a loan sanctioned against such plans or projects or proposals. If you comply with the eligibility criteria, Government grants as a funding option could be one of the best. You just need to make yourselfaware of the various Government initiatives. Some of the Schemeare: Pradhan Mantri MUDRA Yojana for SME loans upto Rs. 10lakhs. Atmanirbhar Bharat package to fight covid-19situation MSME government business loan upto Rs. 1Crore in 59minutes. National Small Industries Corporation aids to promote the growth ofMSMEs. Such other schemes as may be introduced by the government ofIndia Equity Finance Equity Finance as the name suggests means raising capital by way of issue of sharesto the public by way of IPOs, FPOs, GDRs, etc. Equity capital is one of the wideused methods of funding a business. The equity shareholders get the opportunity to participate and vote in shareholders meeting on important matters relating to the company. Further,a healthy amount of equity capital is a must for every business in order to maintain healthy financial ratios, operate efficiently and raise other types of funding whenrequired.

3. Preference Finance Same like equity, raising capital by way of issue of preference shares is also anotherform of business finance. The preference shareholders enjoy priority over dividend and profits of the company before the equity shareholders. The company can issue redeemable preference shares which can be redeemed within20years. Debt Finance Debt finance means funding either by way of debenture or bonds issue to the investors. Debentures provide long-term funding for a company in the form of debt. Most of the financers opt for debt finance. Through Debt financing the financers keep themselves safe from any defaults or failure in repayment of the loan amount. They carry fixed rateof interest and a fixed tenure of loanrepayment. Deposits The Companies Act, 2013 has introduced acceptance of deposits from members or shareholder or directors of the Company without much compliance requirements. Where the owners are not willing to dilute their equity stake, they may opt for acceptingdeposits from members or shareholders and even general public at large. Deposits from public at large requires proper following of compliances and filing of forms withROC. ****** The author can be reached at [emailprotected] Disclaimer: This article is written merely for informational purposes and it should notbe taken as a legal advice. The readers are advised to consult competent professionals before acting on the basis of any information providedhere. Tags:NBFC Kindly Refer to Privacy Policy & Complete Terms of Use andDisclaimer. AuthorBio Name: PrernaHunagund Qualification: CS

4. Company: N/A Location: Bangalore, Karnataka, India Member Since: 31 Jul 2021 | Total Posts:14 Prerna Hunagund is a Practising Company Secretary, Graduate in Commerce & an Associate Member of the Institute of Company Secretaries of India, New Delhi,having knowledge in Corporate and Secretarial Law. View FullProfile My PublishedPosts Overview of Property Search Report & ROC SearchReport Deposits under Companies Act, 2013- Inclusion, Applicability, DPT-3 Filing Labour Laws and its Applicability Preferential Allotment of Shares – Key Factors, Procedure &Timeline All about Debentures under Companies Act,2013 View More Published Posts Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects. Join Taxguru Group onTelegram TELEGRAM GROUPLINK More UnderFinance «PreviousArticle Next Article» Leave aComment Your email address will not be published. Required fields are marked *