ENTREPRENEUR

BY
OBIH, A. O. SOLOMON PHD,
 MODULE I

INTRODUCTION
Putting all your eggs in one basket is never a good business strategy.
This is especially true when it comes to financing your new business. Not
only will diversifying your sources of financing allow your start-up to
better weather potential downturns, but it will also improve your chances
of getting the appropriate financing to meet your specific needs. In this
module, we will discuss about the internal and external source of funds for
entrepreneurs.
 Internal sources of finance are those generated
within the business. On the other hand, External
sources of finance are those outside the business
such as suppliers, lenders, kept and investors.
INTERNAL SOURCE OF FUND:
INTERNAL SOURCE OF FUND ARE:

1. Retained Equity Earnings:

This implies retaining the earnings of the shareholders for internal reinvestment. Every
rupee retained is a rupee with-held from distribution to existing shareholders. While doing
so, management must do something to maintain the interest of shareholders.
2. Depreciation Provisions:
Depreciation provisions represent the maintenance of a capital stock to replace the existing
machinery when it becomes uneconomical to use. Depreciation provision is a major source
of internally generated funds.
3. Deferred Taxation:
Due to the time-lag between the earning of profit and payment of the appropriate
taxation, the funds, represented by the tax liability, are available for use.

4. Personal Funds Saved or Inherited:

In order to win confidence of external financiers, it is very necessary that the would-be
owner must have assets of his own to invest in the firm.
EXTERNAL SOURCE OF FINANCE:
INTERNAL SOURCE OF FUND ARE:

• 1. Savings:
People save a percentage of their salary for a ‘rainy day’. With the money thus saved, people purchase life
insurance, buy stocks and bonds, buy shares or deposit in a bank. Thus saved money is made available to business
enterprises for further use and investment. It may be said that almost all capital for investment in business and industry
comes from savings of people.
• 2. Loans:
Money can be borrowed from the following sources for starting or expanding the business:
(i) Friends and relations,
(ii) Money lending institutions, and  
(iii) Commercial and other banks, etc.

When money is borrowed, it becomes obligatory that the interest should be paid in
time and the loan be paid back on the mutually agreed date.
3. Shares:
Funds are collected by issuing shares to public. The
number of authorized shares that can be issued and
the value of each share is specified. This is decided
on the basis of the capital to be collected by issuing
shares. Shares are issued for raising funds either
when starting a new concern or when it is decided
to expand and improve upon the existing one.
4. Debentures:
Business corporations having good record of earnings and favourable prospects of
expansion, in search for outside (external) funds to support operations and growth,
may raise capital by borrowing it on a formal document known as a Debenture.
Debenture is a certificate of indebtedness issued by the corporation.
A fixed rate interest is paid on debentures and the amount is repayable after the stated
number of years. The essential relationship between the company and the (bond)
debenture-holder is that of debtor-creditor. Debentures are generally un-secured
bonds which have no claim on any specific asset of the company but are backed by
the earning power and general credit of the company as viewed by the investor.
For this reason, only companies with a very good profit record and a high financial
standing can hope to sell unsecured bonds or debentures. The issue of debentures can
be a very useful method of raising finance at reasonable cost.
5. Corporate Bonds:
Corporate bonds are of two types:
i. Unsecured bonds or Debentures as discussed above, and
ii. Secured bonds, in which case some form of claim on the assets of the
corporation is tied if the corporation fails to pay interest to the investor or
does not return his money back after the stated number of years. Mortgage
bonds are examples of secured bonds.
6. Public Deposits:
Public may be asked to deposit their money directly with the company for a
fixed long/short period ranging from half a year to seven years.
7. Taking in Partners:
Capital may be raised by adding partners in the business who are ready to invest
in the firm.
8. Bank Loans:
Short term loans are easily available from commercial and other banks on
reasonable interest rates.
9. Hire Purchase:
The hirer makes a deposit, he gets the machinery (goods), etc., he needs and then
he pays a number of periodical money installments. At the end of a period when
all the installments have been paid, the possession of the goods passes to the hirer.
10. Sale and Lease Back:
For getting funds, a company may sell some of its property to an investment
company with a right to lease back at an agreed rent.
Others are ;
11. Equipment Leasing:
12. Profit Plowback:
13. Credit Facilities:
14. Trade Credit:
15. Special Institutions:
Module II
FORMAL AND INFORMAL
SOURCES OF FUNDS OF
ENTREPRENEUR.
 INTRODUCTION

Availability of funds is one of the main obstacles that entrepreneurs face

when trying to initiate and consolidate their business. Though every firm at

every stage of its development needs to find financial sources to realize its

projects and expand business. Substantial growth in its capacities often requires

large amounts of investments; hence, every firm seeks for access to cost-

effective funding, which will allow a project to be profitable. This module will

open us up to formal and informal sources of funds of entrepreneur.

 Informal sources of Fund

Informal include friends and relatives that provide the

necessary equity capital for businesses. In informal Sources

entrepreneurs, there is an access to the conventional banks credit,

traditionally source of funding from personal savings, parents,

husbands and family members. Fathers, husbands and other family

members remain the traditional sources of funding for women

entrepreneurs in conservative societies (Mc Elwee & Al-Riyami

(2003).
 These sources typically provide start-up capital sufficient for small scale business, such

as retail establishments, restaurants, and day care facilities which are common business

engage by entrepreneurs, which remain the same as fathers, husbands, or other family

members are typically the traditional sources of funding for entrepreneurs who normally

provide sufficient capital for small scale business ventures (Syed, 2011).

This source of financing does not require serious paper works. Sources under informal

provides financial assistance with or without demanding serious collateral security from

SMEs' owners, rather, it may base it on words of mouth or with simple agreement. Besides

owners' savings, informal source comes from friends, relatives and business angels Riding

(2006).
Formal financial sources are divided into institutional venture capital financing,

bank loans, initial public offering (IPO), etc. This financial support can be

provided in much greater amounts, but requirements for disclosure of accounting

data are stricter. This refers to those financial institutions that are established by

law to carry out financial business activities and at the same time are saddled

with the responsibilities of assisting in growth, development and survival of

businesses by providing facilities after fulfilling a certain criterion like collateral

security which is commonly used.

The formal source comprises Commercial banks, corporative

societies, micro finance banks, Bank of industry, and

Development banks. According to Beck, Demirgüç-Kunt and

Pería (2008), most banks, independently of their country of

operation or ownership type, have set up separate departments to

manage their relations with SMEs.

Conclusions

Funding has been one of the key concerns of public policies aimed at

supporting entrepreneurship in third World countries especially in Nigeria.

However, according to GEM National Experts Survey, entrepreneurs’

access to equity funds has not improved over the past four years. In this

respect, both formal and informal venture capital investment have been

growing at a very low rate and available funding sources for nascent

ventures has predominantly come from founders themselves, their relatives

and friends and from public subsidies.

MODULE III
 Efficiency in the use of Resources

The assets, both tangible and intangible, that are

mobilized by entrepreneurs in the process of building

a business, organization, or other initiative is referred

as resources. A resource would be anything that

would help entrepreneurs to develop their business.  

 Resource use efficiency: This is the output of any crop or anything else per unit of

the resource applied under a specified set of conditions.

Image result for resource efficiency

Resource Efficiency. Resource efficiency means using the Earth's limited resources

in a sustainable manner while minimizing impacts on the environment. It allows us to

create more with less and to deliver greater value with less input. Resource efficiency isn't

only valuable because it is essential for sustained economic growth... Moreover,

promoting resource efficiency can increase the competitiveness of industry, create jobs,

stimulate innovation, boost sectors such as recycling and resource recovery, and help

ensure secure supplies of key resources.

Tips for Efficiency use of Recourses by entrepreneurs

1. Plan to Plan. (Planning) is important when it comes to being

efficient. ...

2. Take a Systematic Approach

3. Use Technology Where Possible. ...

4. Use Resource Management Software.

5.Employment Law Information Network. Information and advice on

federal and state employment law, including guidebooks on and

sample policies for all aspects of HR.

6. Buyer Zone. Ready to equip your startup by buying business

products and services? Visit this site to research your options and

connect with sellers.

7Small Business Administration. Find information, links and
resources to help you start and grow your business, including loans.
8. SCORE. Get matched with an experienced

SCORE mentor to receive free counseling

and advice, in person or online.

9. Don't take 'no' for an answer.

10.Entrepreneurship Advice Is About Mindset

Want to Be a Successful Entrepreneur?
Do What You Know.

Successful entrepreneurs build

companies in industries they understand.

THANK

YOU