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Financial Support

An entrepreneur needs a continuous flow of funds for his business so as to run its activities smoothly. The funds are invested in the physical resources i.e. land, buildings, machines, equipments, raw materials, etc which are used by the enterprise in production and marketing process. In other words, these funds are a pre-requisite for mobilisation of the real resources of the firm. An enterprise needs regular and proper financial support at every stage in order to grow and sustain the business.

A business enterprise can raise capital from various sources like issue of securities and borrowings from different agencies. The lenders of funds include individual investors, institutional investors, banks and special industrial financial institutions. The borrowers and lenders are brought together through the financial markets i.e. the money and capital markets. In the capital market, a firm can raise funds through issue of shares, bonds and debentures. Mutual funds have also become an important source of financial support to a company. A company can offer its shares directly to the public for the purpose of raising capital in the primary market through Initial Public Offering. It can also enter into an underwriting agreement with financial agencies in order to ensure that the public will subscribe for the entire issue of shares or debentures made by the company. Also, ploughing back of profits is an important source of internal or self financing by a company. It refers to the process of retaining a part of the company's net profits for the purpose of reinvesting in the business itself.

Thus, a company can meet its financial requirements through various means.

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