Question

Akshay is planning to start manufacturing of educational toys for children. He has some savings and has also borrowed some money from his friends and relatives to invest in this business. However, he needs more money to start the business. 

Name and explain any two sources of business finance available to him.

Answer 1

Angel investors and crowd funding are the two types of business funding that Akshay might use to launch his educational toy manufacturing company.

• Angel Investors: Angel investors are rich individuals who fund enterprises for equity or convertible debt. They give industry knowledge, coaching, and networking to the business and invest their own money. Angel investors are ideal for startups like Akshay’s since they take more risks for bigger rewards.
• Crowd Funding: It uses Kickstarter, GoFundMe, or Indiegogo to raise small sums of money from many individuals. Akshay can reach a large audience, validate his product idea, and raise finance without giving up much ownership. It also builds a consumer base before the firm debuts.

Answer 2

The sources of business finance available to Akshay are as follows:

1. Working capital loan: Akshay can use working capital loans to fund the day-to-day operations of his educational toy manufacturing unit, including employee compensation, operational costs, and cash flow shortages.
2. Medium term sources of finance: Akshay can receive cash for more than a year but less than five years by borrowing from public deposits, commercial papers, or lease financing for land leasing and manufacturing. Establishing a plant and utilising suitable equipment and technology to manufacture educational toys for children.