People wonder how entrepreneurs are finding incredible ideas and launching new projects that they can’t even dream about. Has this question also crossed your mind? The ideas are right in front of you, it’s just that your thinking has limited your view. Let me spill the beans. What makes entrepreneurs different is that they view the same problem differently and are curious, passionate, and brave to arrive at a solution, we all face challenges in life. Thus, for them, the issue becomes an opportunity, enthusiasm leads them to several ideas, their ambition makes them relentless to produce results, the confidence helps them to think and move out of the box, and eventually, a startup is called the answer they come to – Let’s sell our ideas. What you said was an issue, it was seen by entrepreneurs as an opportunity, and if more people call it a problem, it’s called a bigger opportunity by entrepreneurs. So, everything begins with a problem! Does that mean that the more issues, the more business? Possibly yes, and that’s what makes India, a global market centre, more individuals, more problems, and thus more business!
WHAT ARE THE TYPES OF FINANCING?
There are different ways for the business to be funded. Although family and friends can lend money without expecting anything in return, everyone else is definitely awaiting consideration. Thus, either understanding a ‘Debt’ or allowing an ‘Equity’ will fund your company.
Debit basically means lending money and paying back to the borrowers involved, usually banks, in instalments along with interest at a fixed rate. You repay the debt over the years, and the lender is out of your business.
Equity implies that the funder has a certain percent stake of the potential income-the start-up does not earn profits, but it may earn in the potential and the equity partner is betting on the same. Your company will expand over the years, and the equity investor will continue to take a share of the same gains. However, because companies need funds to keep expanding, profits are often not distributed but kept in the business, which increases the company’s value. At any point, by selling off his percentage share, the equity investor will leave at a price higher than he initially charged.
It is up to the entrepreneur to select debt or equity funding and how he needs the funding, the amount of funds needed, and how long he wants the investors to be involved.