Sources of Capital for Entrepreneurs

Sources of Capital for Entrepreneurs
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Introduction
As highlighted by Stevenson (2006), entrepreneurship as a concept was initially utilized in the eighteenth century and has been dissected in numerous times by various academic scholars. One of them, Richard Cantillon, asserted that entrepreneurship is the process of buying a commodity at a particular price then selling that commodity at an unknown price. Jean Baptiste further emphasized on this definition by introducing the idea of acquiring all the necessary production factors (Stevenson, 2006).
Schumpeter another scholar, introduced the concept of innovation as it is critical in entrepreneurship in 1911. Through innovation, he asserted that innovation applies to the manner that the individual utilizes the market, the company itself and their product to their advantage. Entrepreneurship, therefore, refers to a process that involves change, invention, and creation and also the innovation required to implement the best strategies towards the success of an organization. Hirich, Peters & Shepherd, (2010) indicated that when starting an entrepreneurial venture, the most complicated issue is obtaining adequate financing.
When seeking financing for their business venture, entrepreneurs mainly rely on various capital sources. Typically capital sources are divided into debt or equity capital sources and internal or external capital sources.
The latter includes personal funds and families and loans from financial institutions. Between these specific banks, there are some that do not intend on investing in a business venture that has numerous issues or their families and friends heavily finance the young company. Therefore, the three primary financial resources that young enterprises seek for capital include venture capitalist firms, business angel and corporate venture capitalists. The paper analyzes the various strategies an entrepreneur can utilize in gaining financial resources to initiate and develop their ventures.
Analysis
Sources of capital for entrepreneurs
Debt Financing
Hisrisch et al. (2010) highlighted that debt financing is the process of gaining funds for the company by borrowing other financial institutions and then paying the debt owed with an additional fee. The primary debt sources include:
Commercial Banks
This financial enterprise is the central source of short term funds for numerous young companies that can provide any available collateral. Such funds are also provided to entrepreneurs that have a guarantor or tangible collateral. This collateral must typically be in the form of personal assets of the entrepreneurs such as a land, car or business assets that include the premises of the specific venture (Hisrich et al., 2010). The primary element in acquiring funds from a commercial bank is the collateral of the entrepreneur which must be worth more than the funds being borrowed from the bank.
Trade Credit Financing
Such financing involves the buying of supplies which is done by the customer on the basis of the account whereby, the client then pays the supplier at a later period. Typically, these periods range from one month to three months (Investopedia, 2013). Any extension on the paym...