Unit 1 :

Introduction to Business and Economics

1. Business Organisation Meaning:

Business: A business is defined as an organization or enterprising entity engaged in
commercial, industrial, or professional activities. ... The term "business" also refers to
the organized efforts and activities of individuals to produce and sell goods and
services for profit.

Business Organisation: The term business organization describes how businesses

are structured and how their structure helps them meet their goals. In general,
businesses are designed to focus on either generating profit or improving society. ...
The basic categories of business organization are sole proprietorship, partnership,
and corporation.

Characteristics
1. Distinct Ownership : The term ownership refers to the right of an individual or a
group of individuals to acquire legal title to assets or properties for the purpose of
running the business. A business firm may be owned by one individual or a group of
individuals jointly.
2. Lawful Business : Every business enterprise must undertake such business which
is lawful, that is, the business must not involve activities which are illegal.
3. Separate Status and Management : Every business undertaking is an independent
entity. It has its own assets and liabilities. It has its own way of functioning. The
profits earned or losses incurred by one firm cannot be accounted for by any other
firm.
4. Dealing in goods and services : Every business undertaking is engaged in the
production and/or distribution of goods or services in exchange of money.
5. Continuity of business operations : All business enterprise engage in operation on
a continuous basis. Any unit having just one single operation or transaction is not a
business unit.
6. Risk involvement : Business undertakings are always exposed to risk and
uncertainty. Business is influenced by future conditions which are unpredictable and
uncertain. This makes business decisions risky, thereby increasing the chances of loss
arising out of business.
Features of business:
1. Perception: they are able to predict how you will receive their message
2. Precision: they create a "meeting of the minds" .When the finish expressing
themselves share the same mental picture.
3. Credibility: they are believable. you trust their information
4. Control: They shape your response, they can make you laugh, cry and change your
mind and take action.
5. Congeniality: They maintain friendly, pleasure relations with you regardless
whether you agree with them or not.
Definition of firm:
Hansn: The firm may be defined as an independently administered business unit.
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“A firm is a business unit which hires productive resources for the purpose of
producing goods and services”.
The following features of a firm emerge from these definitions:
1. It is a centre where decisions are taken about, what, where, how and how much
to produce.
2. It is a centre where the means of production are hired or purchased and used for
production.
3. It is a centre, where the success of production is reviewed in its entire context
and decisions are taken.
4. Itisacentre,wherethemeansofproduct

2. Business Structures and Types of Business Entities 

A business structure refers to the organization of a company in regards to its legal
status. Choosing the most appropriate business structure creates a legal recognition for
your trade. Above all, a business structure trickles down to so many other factors
which are part and parcel of running a successful business.

Types of business structures

Sole Proprietorship 
Sole Proprietorship is the simplest business structure, and it can be dissolved with the
most ease. In fact, many people already have a sole proprietorship without even
knowing it. Simply running a business by yourself means that you are classified as a
sole proprietorship. Sole-proprietors are also known as consultants, freelancers or
independent contractors.

This is a business run by one individual for his or her own benefit. This form of
ownership is operated by alone individual for his or her own gain and does not exist
outside of the owner. The owner is also liable even if he or she only invests a portion
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of their money into the business. Any liabilities from the business falls upon the
owner, and the organization itself ceases to exist if the owner dies.

Sole Proprietorship is one of the simplest business structures.

Advantages of Sole Proprietorships
Advantages of sole proprietorships include:
 Cost savings. Sole proprietorships are the simplest business structure to form.
 No control issues. Since you're the only person who owns the business, no one
else has control over it.
 Tax simplicity. You and your business are treated one in the same. No need to
file separate business taxes.
Disadvantages of Sole Proprietorships
Venture capital firms generally don't like sole proprietorships because:
 No stock issuance. Venture capital firms want preferred stock. As a sole
proprietorship, you cannot issue any type of stock.
 Unlimited liability. You are fully liable for any business debts. One mistake
could destroy your business and personal assets leaving the firm with a lost
investment.
Partnerships
A partnership is a formal arrangement by two or more parties to manage and operate
a business and share its profits. There are several types of partnership arrangements.
In particular, in a partnership business, all partners share liabilities and profits
equally, while in others, partners have limited liability.

There are no requirements to create a partnership, and they are easy to operate.
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There are three types of partnerships, general partnerships, limited partnerships
and limited liability partnerships (LLP).
1. General Partnership
In a general partnership, the owners have no liability protection against the debts of
the business and both owners are responsible for 100% of the debt. A general
partnership does, however, come with a few benefits not experienced with the limited
liability counterparts:
 Easy to create. You won't have to file with the state to start doing business, it is
just an agreement between two more people to enter into a business together.
 Reduction in fees. Without filing state paperwork, a variety of fees and taxes
are avoided.
1. Limited Partnership
Limited Partnerships require two types of partners. At least one General Partner who
operates the partnership and is not given any liability protection for the debts of the
business. And at least one Limited Partner, who are passive investors and they have
limited liability.  This structure is not very popular since the rise of the LLC which
gives the general partner liability protection as well.  You see it some in the motion
picture business where the limited partners want the general partners to be responsible
for the debts, but, it is not that common.
There are other advantages of limited partnerships over General Partnership:
 Limited partners have liability protection.
 Limited partners are passive. Limited partners are essentially treated as
investors and have no managerial control.
1. Limited Liability Partnerships

A limited partnership is similar to a general partnership except that it has two classes
of partners. The general partner(s) have full management and control of the
partnership business but also accept full personal responsibility for partnership
liabilities. Limited partners have no personal liability beyond their investment in the
partnership interest. Limited partners cannot participate in the general management
and daily operations of the partnership business without being considered general
partners in the eyes of the law.
Advantages of LLPs include:
 Protection from partner issues. Individual partners are protected from liability
brought on by the negligence of another partner.
 No double taxation. Profits and losses are filed on personal income taxes.
 Fewer regulations. No need to have or participate in yearly meetings, so less
paperwork is required.
 Ownership flexibility. No limit on the number of owners.
 Flexible managerial structure. Partners can contribute as much or as little as
desired.
Disadvantages of LLPs
 Limited eligibility. Some states require partners to be lawyers, doctors or other
professionals.
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 Liability protection reduced. Not as much liability protection as LLCs and
corporations.
Other types of partnership

Essential Features of Partnership

Advantages of Partnership
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Disadvantages of Partnership

Corporation:
A corporation is an organization—usually a group of people or a company—
authorized by the state to act as a single entity (a legal entity; a legal person in legal
context) and recognized as such in law for certain purposes. Early incorporated
entities were established by charter (i.e. by an ad hoc act granted by a monarch or
passed by a parliament or legislature). Most jurisdictions now allow the creation of
new corporations through registration.

Corporations come in many different types but are usually divided by the law of the
jurisdiction where they are chartered based on two aspects: by whether they can issue
stock, or by whether they are formed to make a profit.
Depending on the number of owners, a corporation can be classified as 2
1. aggregate
2. Sole
An articles of incorporation document must also be filed with authorities to create a
corporation. Stockholders are safeguarded from any liability, and
stockholders/employees can take advantage of certain benefits, including health
insurance. Other benefits include tax deductions.
Further, owners and the business can pay lower taxes by porting profits among each
member.
Characteristics of a Corporation
Following are the major distinguishing characteristics of a corporation:
Ownership
Shareholders are the owners of a corporation.
Board of Directors
A corporation is managed by a board of directors, which is elected by the
shareholders.
Perpetual Existence
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A corporation continues to exist for an unlimited period of time. It remains unaffected
by the retirement or death of its shareholders. A corporation terminates only if:
 Its shareholders dissolve it, or
 It becomes bankrupt.
Limited Liability
Shareholders of a corporation have limited liability. If the corporation becomes
bankrupt, creditors cannot pursue personal assets of the shareholders. However, under
certain circumstances like fraud and illegal activities, courts may lift the corporate veil
and make the shareholders personally liable for the resulting debts and liabilities.
The limited liability feature has made corporations a popular form of business in the
United States. If the corporation is unable to meet its debts and obligations, its shares
tend to lose their value. However, shareholders cannot be forced to pay back the
company debts.
Corporate Taxes
Corporations are liable to pay taxes on their income even if the income is distributed
among shareholders as dividend. Since the distributed income is again taxed in the
hands of the shareholders, this often results in double taxation.
Distinct Legal Entity
Corporations are distinct legal entities that exist independent of their shareholders.
They can own assets, enter into contracts, borrow money, sue others, and can be sued
in their own name.

C Corporation
A C corporation (C-corp) is probably the most common business structure in the
United States and has been around much longer than the others on this list. Larger
companies usually favor this structure. C Corporations are independent legal and tax
entities from owners, and there is no limit in the amount of shareholders. C status also
distinguishes your business debts and personal assets. C Corporations are doubly
taxed on dividends and business profits.
Advantages of C Corporations
 Owners have limited liability. The owners' assets are protected from the debts
and liabilities of the corporation. Shareholders are not held liable for business losses.
 Easier to raise capital. It is easier to attract capital with the sale of stocks and
bonds. A corporation can have an unlimited number of investors.
 Easy to transfer ownership. Shares of stock can be sold.
 Corporations have perpetual lifetimes. The entity continues to exist beyond
the deaths of the owners.
 Certain expenses are tax deductible. Owners can receive tax-free benefits
such as deductions for retirement plans and insurance.
Disadvantages of C Corporations
 Double taxation of corporation profits. The corporation pays federal and
state taxes on its profits. When dividends are paid to shareholders, they are treated as
income and taxed again.
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 Forming a corporation costs more. Attorneys charge more to form a
corporation.
 States have higher fees. States charge annual franchise fees for corporations.
 More state and federal regulations and oversight. Tax filings are more
complicated for corporations. States require the filing of Articles of Incorporation,
corporate bylaws and annual reports. Corporations must designate a board of directors
and hold annual meetings.

S corporation
An S corporation is simply a tax election that corporations and LLCs can make to be
taxed under Subchapter S of the IRS tax code that eliminates the double taxation
problem inherent with C-Corps. In order to take advantage of this tax election, the
code requires the entities to meet certain requirements.
S Corporations are created solely for smaller companies to gain tax advantages,
provided IRS codes are satisfied. They operate in the same manner as a C
Corporation, but face the same amount of taxation as a partnership.
S Corporations have limited protections, but have full control over profit amounts to
members. For S Corporations, you must have at least a single shareholder but not over
100. S-based owners also enjoy a certain amount of liability protection against debts
or judgments.
Advantages of S Corporations
 S Corporations avoid the double taxation aspect of C corporations. The
income of an S corporation is not taxed at the corporate level. Instead, the reported
income is passed through to the owners where it is taxed at personal tax rates.
 Owners have limited liability.
 Transfer of ownership of shares is easy.
 S corps have perpetual lifetimes.
 Owners receive tax-free benefits because the corporate can take deductions
for deferred compensation plans, insurance and retirement plans.
Disadvantages of S Corporations
 Only one class of stock is permitted.
 S corps are limited to a maximum of 100 shareholders.
 Stockholders types are limited. Stockholders can only include individuals,
estates and trusts. Other corporations, partnerships and nonresident aliens cannot own
shares of an S corporation.
Nonprofit Corporation
Nonprofit corporations do not pay income taxes on any money received for charity
causes. Donors can also deduct any donations from personal income taxes. Also,
nonprofits usually enjoy exempt status when it comes to state and federal taxation,
also known as “exempt organizations.”
If you need help with different types of business entities, you can post your legal need
on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to
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its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale
Law and average 14 years of legal experience.

3. Limited Liability Company (LLC

Business owners looking for the liability protection that a corporation can provide,
without the double taxation, should consider forming a limited liability company
(LLC). An LLC is a business entity with all the protection of a corporation plus the
ability to pass through any business profits and losses to your personal income tax
return.
An LLC is a hybrid type of business structure where the owners of the LLC are called
“members,” and all enjoy the advantages that an LLC has to offer. LLC members can
be an individual business owner, several partners, or other businesses.
Features of LLC
 Independent legal structures separate from their owners.
 Help separate your personal assets from your business debts.
 Taxed similarly to a sole proprietorship (if one owner) or a partnership (if
multiple owners).
 No limit to the number of owners.
 Not required to hold annual meetings or record minutes.
 Governed by operating agreements.
Advantages of Starting an LLC
There are several advantages to creating an LLC, but here are a few that stand out.
 Pass-through taxes. There's no need to file a corporate tax return. LLC owners
report their share of profit and loss on their individual tax returns, meaning you avoid
double taxation.
 No residency requirement. Those who an LLC need not be U.S. citizens or
permanent residents.
 Legal protection. Creating an LLC gives you limited liability for business
debts and obligations.
 Enhanced credibility. Partners, suppliers, and lenders may look more
favorably on your business when it's an LLC.
Disadvantages of Starting an LLC
Creating an LLC is an attractive option, but there are a few hurdles.
 Limited growth potential. LLC owners cannot issue shares of stock to attract
investors.
 Lack of uniformity. An LLC can be treated differently in different states.
 Self-employment tax. LLC earnings can be subject to this kind of taxation.
 Tax recognition on appreciated assets. This could happen if you convert an
existing business to an LLC. One more way that extra taxation can occur.
How to Create an LLC (Limited Liability Company):
1. Choose a legal name and reserve it, if the Secretary of State in your state does
that sort of thing (not all do).
2. Draft and file your Articles of Incorporation with your Secretary of State.
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3. Decide who will run the business (managers or members).
4. Decide how many owners will be part of the LLC.
5. Apply for a business license and other certificates specific to your industry.
6. File Form SS-4 or apply online at the Internal Revenue Service website to
obtain an Employer Identification Number (EIN).
7. Apply for any other ID numbers required by state and local government
agencies. Requirements vary from one jurisdiction to another, but generally your
business most likely will be required to pay unemployment, disability, and other
payroll taxes – you will need tax ID numbers for those accounts in addition to your
EIN.

4. Theory of the firm

What Is the Theory of the Firm
The theory of the firm is the microeconomic concept founded in neoclassical
economics that states that a firm exists and make decisions to maximize profits. The
theory holds that the overall nature of companies is to maximize profits meaning to
create as much of a gap between revenue and costs. The firm's goal is to determine
pricing and demand within the market and allocate resources to maximize net profits.
The theory of the firm consists of a number of economic theories that explain and
predict the nature of the firm, company, or corporation, including its existence,
behaviour, structure, and relationship to the market.
The theory of the firm aims to answer these questions:
1. Existence. Why do firms emerge? Why are not all transactions in the economy
mediated over the market?
2. Boundaries. Why is the boundary between firms and the market located exactly
there with relation to size and output variety? Which transactions are performed
internally and which are negotiated on the market?
3. Organization. Why are firms structured in such a specific way, for example as to
hierarchy or decentralization? What is the interplay of formal and informal
relationships?
4. Heterogeneity of firm actions/performances. What drives different actions and
performances of firms?
Types of theories:
A). Transaction Cost Theory: The transaction cost approach to the theory of the firm
was created by Ronald Coase. Transaction cost refers to the cost of providing for
some good or service through the market rather than having it provided from within
the firm.
In order to carry out a market transaction it is necessary to discover who it is that one
wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the
contract, to undertake the inspection needed to make sure that the terms of the contract
are being observed, and so on.
Types of transaction costs:
a) search and information costs
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b) bargaining and decision costs
c) policing and enforcement costs

B). Managerial Theories: Management theories are the set of general rules that guide
the managers to manage an organization. Theories are an explanation to assist
employees to effectively relate to the business goals and implement effective means to
achieve the same. 
General Management Theories: There are four general management theories.
a) Frederick Taylor – Theory of Scientific Management. 
Developed by Frederick Taylor, he was one of the first to study work performance
scientifically. Taylor’s principles recommended that the scientific method should be
used to perform tasks in the workplace, as opposed to the leader relying on their
judgment or the personal discretion of team members.
Principles Scientific Management
1. Replacement of Old Rule of Thumb Method 2. Scientific Selection and Training of
Workers 3. Co-Operation between Labour and Management 4. Maximum Output 5.
Equal Division of Responsibility 6. Mental Revolution 7. Harmony, not Discord 8.
Development of Each and Every Person to His or Her Greatest Efficiency and
Prosperity 9. Subordination of Individual Interests to General Interest.
b) Henri Fayol – Administrative Management Theory.
Fayol's "14 Principles" was one of the earliest theories of management to be created,
and remains one of the most comprehensive. He's considered to be among the most
influential contributors to the modern concept of management, even though people
don't refer to "The 14 Principles" often today.
Fayol's principles are listed below:
1. Division of Work – When employees are specialized, output can increase
because they become increasingly skilled and efficient.
2. Authority – Managers must have the authority to give orders, but they must
also keep in mind that with authority comes responsibility.
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3. Discipline – Discipline must be upheld in organizations, but methods for doing
so can vary.
4. Unity of Command – Employees should have only one direct supervisor.
5. Unity of Direction – Teams with the same objective should be working under
the direction of one manager, using one plan. This will ensure that action is properly
coordinated.
6. Subordination of Individual Interests to the General Interest – The interests of
one employee should not be allowed to become more important than those of the
group. This includes managers.
7. Remuneration – Employee satisfaction depends on fair remuneration for
everyone. This includes financial and non-financial compensation.
8. Centralization – This principle refers to how close employees are to the
decision-making process. It is important to aim for an appropriate balance.
9. Scalar Chain – Employees should be aware of where they stand in the
organization's hierarchy, or chain of command.
10. Order – The workplace facilities must be clean, tidy and safe for employees.
Everything should have its place.
11. Equity – Managers should be fair to staff at all times, both maintaining
discipline as necessary and acting with kindness where appropriate.
12. Stability of Tenure of Personnel – Managers should strive to minimize
employee turnover. Personnel planning should be a priority.
13. Initiative – Employees should be given the necessary level of freedom to create
and carry out plans.
14. Esprit de Corps – Organizations should strive to promote team spirit and unity.
c) Max Weber - Bureaucratic Theory of Management.
Developed by Max Weber, bureaucratic management theory focuses on structuring
organizations in a hierarchy so there are clear rules of governance. 
His principles for creating this system include 
1. chain of command
2. clear division of labor
3. separation of personal and organizational assets of the owner
4. strict and consistent rules and regulations, meticulous record keeping and
documentation
5. the selection and promotion of employees based on their performance and
qualifications. 
This theory has played a key role in establishing standards and procedures that are at
the core of most organizations today.
d) Elton Mayo – Behavioral Theory of Management (Hawthorne Effect).
In 1924, Australian sociologist Elton Mayo, who later became an industrial research
professor at Harvard, began a series of studies that demonstrated that employee
motivation is heavily influenced by social and situational factors. Mayo’s findings,
referred to as the “Hawthorne Effect,”
Some of the major phases of Hawthorne experiments are as follows:
1. Illumination Experiments: Experiments to determine the effects of changes in
illumination on productivity, illumination experiments, 1924-27.
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2. Relay Assembly Test Room Experiments: Experiments to determine the effects
of changes in hours and other working conditions on productivity, relay assembly test
room experiments, 1927-28;
3. Mass Interviewing Programme: Conducting plant-wide interviews to determine
worker attitudes and sentiments, mass interviewing programme, 1928-30; and
4. Bank Wiring Observation Room Experiment: Determination and analysis of
social organisation at work, bank wiring observation room experiments, 1931-32.
And thus he came to the following finale conclusions:
 Individual employees must be seen as members of a group;
 Salary and good working conditions are less important for employees and a
sense of belonging to a group;
 Informal groups in the workplace have a strong influence on the behaviour of
employees in said group;
 Managers must take social needs, such as belonging to an (informal) group,
seriously.

D). Behavioural Theories of the Firm

Definition of Behavioural Theories of the Firm: An examination of the inner motives
and direction of firms, using a range of models and different assumptions about those
who work in a firm.
In classical economics, the theory of firms is based on the assumption that they will
seek profit maximisation. However, in the real world managers and owners may
behave quite differently. 
Behavioural Theories of the Firm include:
 Size of a firm/prestige. Some managers may simply aim for working in a big
and seemingly successful firm which gives more prestige and honour. Managers may
be motivated to prove their projects are successful. This can cause firms to pursue
goals which have a high profile. It may explain why firms persist with projects which
may not be desirable. There is a cost to letting go of past decisions.
 Profit Satisficing: Based on the problem of asymmetric information. Owners
wish to maximise profits, but, workers don’t. Because owners don’t have perfect
information, workers and managers are able to get away with decisions that don’t
maximise profits.
 Co-operative/ethical concerns. Some firms may be set up with very different
objectives to the traditional model of profit maximisation. In co-operative firms, the
goal is to maximise the welfare of all stakeholders. In this model, ideas of altruism,
concern for the environment and workers welfare may explain many decisions. The
firm may also be set up with specific charitable aims.
 Human emotion/bias. The economic model of a rational economic man
assumes that individuals seek to maximise their economic welfare with rational
choice. However, in the real world, we are influenced by human emotion. This could
be discrimination based on bias and prejudice. Or it could be irrational exuberance and
the perceived wisdom of following the crowd. For example, in asset bubbles,
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mortgage companies can get caught up in relaxing their lending criteria and lending
mortgages to those at risk of default.

5. Sources of Finance
Finance is significant for business because it cannot carry out its operations even for a
single day without finance. It is therefore important to search the sources from where
funds can be collected. The selection of source depends upon the amount of funds
required, nature of business, repayment period, debt-equity mix, etc. The selection of
source also depends upon the purposes for which funds are needed.
A) Long term finance: Long term finance available for a long period say five years
and above. The long term methods outlined below are used to purchase fixed assets
such as land and buildings, plant and so on.
a) Own capital : Money invested by the owners, partners or promoters is permanent
and will stay with the business throughout the life of business.
b) Share capital : Normally in the case of a company, the capital is raised by issue of
shares. The capital so raised is called share capital. The share capital can be of two
types, preference share capital and equity share capital.
c) Debentures: Debentures are the loans taken by the company. It is a certificate or
letter by the company under its common seal acknowledging the receipt of loan. A
debenture holder is the creditor of the company. A debenture holder is entitled to a
fixed rate of interest on the debenture amount.
d) Government grants and loans: Government may provide long term finance
directly
to the business houses or by indirectly subscribing to the shares of the companies.
B) Medium term finance
a). Bank loans: Bank loans are extended at a fixed rate of interest. Repayment of the
loan and interest are scheduled at the beginning and are usually directly debited to the
current account of the borrower. These are secured loans.
b). Hire purchase: It is a facility to buy a fixed asset while paying the price over a
long period of time. In other words , the possession of the asset can be taken by
making a down payment of a part of the price and the balance will be repaid with a
fixed rate of interest in agreed number of instalments.
c). Leasing or renting: where there is a need for fixed assets, the asset need not be
purchased. It can be taken on lease or rent for specified number of years. Venture
capital: this form of finance is available only for limited companies. Venture capital is
normally provided in such projects where there is relatively a higher degree of risk.
C) Short Term Finance
a). Commercial paper: It is new money market instrument introduced in India in
recent times. Cps are issued in large denominations by the leading, nationally reputed,
highly rated and credit worthy, large manufacturing and finance companies in the
public and private sector.
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b). Bank overdraft: This is special arrangement with the banker where the customer
can draw more than what he has in his saving/ current account subject to a maximum
limit. interest is charged on a day to day basis on the actual amount overdrawn .
c). Trade credit: This is short term credit facility extended by the creditors to the
debtors, normally, it is common for the traders to buy the materials and other supplies
from the suppliers on credit basis.

6. Non Conventional Sources of Finance

Entrepreneurs can turn to a variety of sources to finance the establishment or
expansion of their businesses. Common sources of business capital include personal
savings, loans from friends and relatives, loans from financial institutions such as
banks or credit unions, loans from commercial finance companies, assistance from
venture capital firms or investment clubs, loans from the Small Business
Administration and other government agencies, and personal or corporate credit
cards. 
But for some business people, these sources of financing are either unavailable, or
available with restrictions or provisions that are either impossible for the company to
meet or deemed excessive by the business owner. In such instances, the capital-hungry
entrepreneur has the option of pursuing a number of nontraditional financing sources
to secure the money that his or her company needs. 
Some of the more common nontraditional financing sources
1. Crowdfunding: Funding a project or venture by raising money from large
number of people who each contribute a relatively small amount, with an average
raise of about $7,000, typically via internet, it has not yet become a major source of
business capital.
2. Peer-to-Peer (P2P) Lending: Business financing is funded by investors, rather
than a single, direct lender. A peer-to-peer business loan is a type of financing funded
by investors instead of one direct lender. P2P lenders underwrite borrowers but don’t
fund the loans directly. 
3. MicroFinance: Microfinance first emerged as a means for entrepreneurs in
emerging economies to access business capital. The term describes small loans made
to entrepreneurs, usually through a platform that allows individuals to invest as little
as $25. the field is just emerging in the United States.
4. Revenue-Based Financing: A growing number of firms are offering
expansion capital through flexible business loans that are paid back based on a portion
of monthly revenue. Revenue-based funding is suitable for existing firms--primarily
those with recurring monthly revenue--rather than startups.
5. Venture Finance: It is the money provided by an outside investor to finance, it
is also called as risk capital, the people who invest this money are called venture
capitalists.
6. Marketing-Focused Funding: clearbancis the pioneer in this innovative
approach to growth funding. To fund business growth, the company provides capital
to fund digital ad spends so growing companies can acquire more customers and drive
revenue growth.
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7. Government-Funded Capital: Cities and states that are outside of Silicon
Valley or other traditional startup hubs are increasingly offering startup or growth
funding as a way to attract new businesses or retain firms that want to expand.
Through these initiatives, a government agency--or a quasi-governmental agency--
offers zero- or low-interest loans, business grants or in some cases, venture capital
with a below-market equity expectation. Some states, and even countries, are also
offering these types of incentives.
8. Accelerator-Based Funding: Many seed accelerators offer small investments
in exchange for a portion of equity, and some now offer follow-on investments for
portfolio companies that raise larger seed rounds during or following the accelerator
program. These innovative approaches allow founders to focus more on growth and
traction, and somewhat less on raising funds.