2.  Finance is the process of raising/acquiring needed
funds or capital for any kind of expenditure in
business.
 Finance is simply defined as the management of
money and includes activities such as investing,
borrowing, lending, budgeting, saving, and
forecasting.

3.  The need for funds arises from the stage when an
entrepreneur makes a decision to start a new
business.
 A business cannot function unless adequate funds are
made available to it. It is called life blood for any
business.
 Business is concerned with the production and
distribution of goods and services for customer
satisfaction that cannot be fulfilled without financial
support.

5. 1) Classification Based on Ownership:-
 Owner's funds mean funds which
are procured by the owners of a
business, which may be a sole
entrepreneur or partners or
shareholders of a business. It also
includes profits which are
reinvested in the business.
 Borrowed funds refer to the funds
raised with the help of loans or
borrowings. The sources for raising
borrowed funds include loans from
commercial banks, loans from
financial institutions, issue of
debentures, public deposits and
trade credit.
Bootstrapping - The process of
building a business from
scratch with minimal external
capital rather with existing
resources such as personal
savings, personal computing
equipment etc; along with invested
funds from family or friends.

6.  In this classification, the funds are generated from within the
organization or from external sources of the organization.
 Internal sources of funds are those that are generated inside the
business. A business, for example, can generate funds internally by
speeding collection of receivables, disposing of surplus inventories
and increasing its profit.
 External sources of funds are the sources that lie outside
an organization, such as suppliers, lenders, and investors. When a
large amount of money is needed to be raised, it is generally done
through the external sources.

7.  Long-term sources fulfil the financial requirements of a business
for a period more than 5 years. It includes various other sources such
as shares and debentures, long-term borrowings and loans from
financial institutions.
 Medium-term sources are the sources where the funds are required
for a period of more than 1 year but less than 5 years. The sources of
the medium term include borrowings from commercial banks, public
deposits, lease financing and loans from financial institutions.
 Short-term sources are required for a period not exceeding more
than 1 year. Trade credit, loans from commercial banks and
commercial papers, Trade Credit, Factoring provide funds for short
duration.

8. ANGEL INVESTORS
 An angel investor provides a large cash infusion of their own money
to an early stage start-up. In return, the angel investor receives equity
or convertible debt.
 Angel investors have ample business knowledge by which they help
in mentoring or advice.

9. VENTURE CAPITALISTS
 A venture capitalist is an individual or group that invests money into high-
risk start-ups. Typically, the potential for the start-up to grow rapidly offsets
the potential risk for failure, thus incentivizing venture capitalists to invest.
 After a set period, the venture capitalist may fully buy the company or, in
the event of an initial public offering (IPO), a large number of its shares.

10. EQUITY SHARES
 Equities are the same as stocks, which are shares in a company.
That means if you buy stocks, you're buying equities. You may also get
“equity” when you join a new company as an employee. That means you're
a partial owner of shares in your company.
 An equity share, also known as ordinary share is a part ownership where
each member is a fractional owner and initiates the maximum
entrepreneurial liability related to a trading concern. These types of
shareholders in any organization possess the right to vote.

11. RETAINED EARNINGS
Retained earnings are the amount of profit a company has left over
after paying all its direct costs, indirect costs, income taxes and its
dividends to shareholders. This represents the portion of the
company's equity that can be used, for instance, to invest in new
equipment, R&D, and marketing.

12. PREFERENCE SHARES
 Preference shares, more commonly referred to as preferred stock,
are shares of a company's stock with dividends that are paid out
to shareholders before common stock dividends are issued.
 If the company enters bankruptcy, preferred stockholders are entitled
to be paid from company assets before common stockholders.

13. LOAN FROM FINANCIAL INSTITUTIONS
 A financial institution is a company engaged in the business of
dealing with financial and monetary transactions such as deposits,
loans, investments, and currency exchange.
 Financial institutions are important because they provide a
marketplace for money and assets, so that capital can be efficiently
allocated to where it is most useful.

14. IPO (INITIAL PUBLIC OFFERING)
 An initial public offering (IPO) refers to the process of offering shares
of a private corporation to the public in a new stock issuance for the first
time. An IPO allows a company to raise equity capital from public
investors.
 A privately owned company lists its shares on a stock exchange,
making them available for purchase by the general public.

15. CROUD FUNDING
 Crowd funding is the use of small amounts of capital from a large
number of individuals to finance a new business venture.
 Crowd funding makes use of the easy accessibility of vast networks of
people through social media and crowd funding websites to bring
investors and entrepreneurs together, with the potential to increase
entrepreneurship by expanding the pool of investors beyond the
traditional circle of owners, relatives, and venture capitalists.

16. DEBENTURES
 A debenture is a type of debt instrument that is not backed by any
collateral and usually has a term greater than 10 years. Debentures
are backed only by the credit worthiness and reputation of the issuer.
 Both corporations and governments frequently issue debentures to
raise capital or funds. Some debentures can convert to equity shares
while others cannot.

17. LOAN FROM BANKS
 Bank loans are sum of money borrowed by a customer or
business from a bank, often for a specific purpose. These loans are
one of the most common forms of finance for small and medium-sized
enterprises
 Bank loans are normally provided at a cost, that is interest on the
owed amount that vary depending on risk of default. Bank loans can be
short term or long term, depending on the purpose of the loan.

18. TRADE CREDIT
 Trade credit is a business-to-business (B2B) agreement between
two businesses in which a customer can purchase goods without
paying cash up front, and paying the supplier at a later scheduled
date, typically within 30, 60, or 90 days.
 Trade credit is commonly used by business organizations as a
source of short-term financing.

19. FACTORING
 Factoring is a type of finance in which a business would sell its
accounts receivable (invoices) to a third party to meet its
short-term liquidity needs.
 Under the transaction between both parties, the factor would pay the
amount due on the invoices minus its commission or fees.

20. COMMERCIAL PAPER
 Commercial paper, is a short-term debt instrument issued by
companies to raise funds generally for a time period up to one
year.
 It is an unsecured money market instrument issued in the form of a
promissory note.

21. PUBLIC DEPOSITS
Public Deposits refer to the unsecured deposits or money invited by
companies from the public mainly to finance their short or long-
term working capital needs.
A public deposit pays a lower interest rate than a borrowed fund. A
public deposit has a lower interest rate than a debenture or loan from a
bank. Also, no underwriting commissions, brokerages, etc., are
charged.

22. LEASE FINANCING
 Lease financing is a popular medium and long-term financing option in
which the owner of an asset grant another person the right to use the
asset in exchange for a periodic payment.
The asset's owner is known as the lesser, and the user is known as the
lessee.

23. LOVE MONEY
 Love money is a slang term (very informal word and expressions
that are common in spoken language) for funding that an
entrepreneur raises directly from friends and family to start a business
venture.
 The decision to lend money and the terms of the agreement are
usually based on the relationship between the two parties, instead of
a formulaic risk analysis.

24. GOVERNMENT GRANT
 An award of financial assistance in the form of money by the federal
government for a beneficial project to an eligible grantee with no
expectation that the funds will be paid back.
 It is an interest rate subsidy that is expected to use the funds from the
grant for their stated purpose, which typically serves some larger good.

25. BUSINESS INCUBATORS
Business incubators provide start-ups and early-stage
businesses with the support and resources those young
companies find difficult to access. Their support might involve
access to networks, investors and mentors, or co-working space
alongside other businesses and experienced professionals.