financing methods and the problems faced by two start up entrepreneurs

Financing a new business venture is one of the biggest obstacles one will face in the start-up phase. Adequate financing can either "make or break” your business' success and future growth. Starting a venture demands the importance of writing an effective business plan to reveal the major categories of expenses like one-time start-up costs for equipment, business promotional materials, advertising and basic operating expenses. Once the financial calculations are complete your financial one will have a clearer idea of how much money is needed in order to finance the business. There are two main ways of financing a business, equity financing and debt financing.
Equity Financing
Equity capital is the amount of money that you and/or your partners put into the business or raise from other investors. Equity is not debt. While investors share in the profits (or losses) of the business, their investment is not a loan.
Personal Investment from Self, Friends, and Relatives
Personal savings, securities, real estate, and other personal assets are the most obvious source of cash for equity financing. Friends and relative and Selling Personal Assets like Antiques, jewelry, stocks, etc. may provide extra funds
Grants, Awards, Contests may be given to qualifying businesses. Some business associations and/or nonprofit organizations may help with loans or give cash awards.
Partner Investment
You may have to find one or more partners willing to put money into the venture to supply equity capital. Obtaining a partner means that ownership of the business, including its profits and liabilities, is normally shared
Shareholder Investment
A business may be incorporated as a private or public corporation. A private corporation can have up to 50 shareholders, but it cannot sell shares to the general public. The vast majority of new small business corporations are private. The public corporations can sell their shares to anyone, they provide the greatest opportunity for raising equity capital
Employee Investment
Another way of raising funds is to ask employees to invest in the business. Employees may be willing to invest in your business because they understand its products or services, trust the management, and are able to closely monitor their investment.
Venture Capital
Most venture capital investment is directed to the expansion of existing businesses. As a general rule, venture capitalists plan to liquidate all or part of their investment in your business at a substantial profit within five to ten years.
Debt Financing
This involves an approach to lenders for a business loan. Debt capital is the money your business borrows.
Business Term Loans (Financing Fixed Assets)
A business term loan has a maturity of not less than one year and usually not more than 15 years. The benefits of a business term is thatthe loan agreement is based on the borrower's ability to repay the loan out of earnings
Long-term loans:
Long-term loans for 10-20 years are collateralized by a business's assets and require quarterly or monthly payments derived from profits or cash flow. Long term loans are favorable for small businesses that can leverage sound financial statements and substantial down payments to minimize monthly payments and total loan costs.
Short-Term Business Loans
Short-term loans are appropriate for both new and existing businesses. When dealing with new businesses, some banks will grant only shorter-term loans, because short-term loans are less risky than loans with longer terms.
Debenture is a certificate of agreement of loans which is given under the company's stamp and carries an undertaking that the debenture holder will get a fixed return and the principal amount whenever the debenture matures. In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. There are two types of debentures Convertible Debentures and Non-Convertible Debentures.
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Even though there exist various types of support in all means the problems usually faced by the Entrepreneurs are majorly due to lack of capital investment and from my interactions with the various Entrepreneurs I could confirm the same. Obtaining loan was another issue as banks wouldn’t give huge loans to just anyone and a person might be having a splendid idea, but lack of finances can be a great hindrance and the support is also minimized if he is not well established or has no influential powers. The start-ups don’t know whom to approach. The other problems include lack of infrastructure planning due to lack of experience and poor planning. Start-ups do not think through sufficiently about this important aspect, but it can make or break. Entrepreneurs also are directly affected by the country's volatile economy, i.e., inflation and recession and fluctuationsin customer demand are also of serious concern. Those factors are veryimportant to the entrepreneurs ability to secure a loan and to obtain credit from suppliers is a major concern of many entrepreneurs,Another problem the entrepreneurs felt important was the demanding of bribes by government officials and unfortunately most of the entrepreneurs have to follow that practice to stay in business and to be successful.
The Lack of Access to information especial information relating to Business and Technology poses a major hindrance. Women, have limited access to technology and information, which leads to many problems and being in a business that you have knowledge about is very important.
Startups often misjudge by devoting all their efforts on getting everything just right, from funding arrangements to design details and forget to make sales their priority and they often forget that all aspects of business should grow in unison; from finance and marketing, to operations and staffing. Solid management team building is another major problem as not all can be potential leaders. Start up entrepreneurs forget the importance of a Business plan development that becomes a problem later. They also find dealing with the government is not an easy job. Savvy entrepreneurs avoid these startup pitfalls by capitalizing on the experience of others, including tapping business mentors to help blaze their way while investment options are much easier these days, just the tact of applying the right person at the right time is important.