Resource Mobilization — Entrepreneurship STD 11 Commerce — Question

Financing an enterprise-whether large or small-is a critical element for success in business. Financing is the use and manipulation of money. Raising money for a business is one aspect of financing.
One of the most difficult problems in the new venture creation process is obtaining finance. While capital is needed throughout the life of business, the new entrepreneur faces significant difficulties in acquiring capital at start-up.

1. The entrepreneur needs to consider all possible sources of capital and select the one that will provide the needed funds at minimal.
2. Different sources of funds are used at various st ages in the growth and development of the venture.
3. If an entrepreneur cannot personally supply the necessary amount of money, other option is ‘OTHER PEOPLE’S MONEY (OPM)’. It means, before seeking outside financing; an entrepreneur should first explore all methods of internal financing and the other external financing and if it suits an entrepreneur he can go for use financial institutions as a sources of financing.
4. Financial institutions provide services as intermediaries of financial markets. There are three major types of financial institutions.

1. Depository institutions.
2. Contractual instutions.
3. Investment institutions.

Loans from Financial Institutions: Institutional finance refers to institutional sources of finance to Industry, other than commercial banks. These institutions are established by the Central/ State Government, aiming at:

• Promoting the industrial development of a country.
• Providing both owned capital and land capital for long and medium term requirements.
• Supplement the traditional financial agencies like commercial banks.
• To encourage setting up of industries in backward areas.
• To provide technical assistance to industrial units.
• To develop investment markets.