Topic covered about sources of finance, capital market, venture capital, and financial institution.

1. Sources of Finance
By sudesh shettigar
MHA

2. Topic covered
1. Commercial bank
2. Development banks / Financial institutions.
3. National & international funding organization
4. Capital market
5. Venture capital
6. Startup capital
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3. Sources of finance
• Finance is the lifeblood of business concern
• Arrangement of the required finance to each
department of business concern is highly a
complex one and it needs careful decision.
• Sources of finance mean the ways for
mobilizing various terms of finance to the
industrial concern.
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4. Introduction
DECISION MAKING PROCESS
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5. Classification of sources of fund
SOURCES OF
FINANCE
Period
Long-term
sources (5-10)
● Equity Shares
● Preference Shares
● Debenture
● Long-term Loans
● Fixed Deposits
* Venture capital
Short-term
sources
● Bank Credit (w.c)
● Customer Advances
● Trade Credit
● Factoring
● Public Deposits
● Money Market
Instruments(CP)
Ownership
ownership
source
● Shares capital,
earnings
● Retained
earnings
● Surplus and
Profits
Borrowed
capital
● Debenture
● Bonds
● Public deposits
● Loans from
Bank and
Financial
Institutions.
Generation
Internal source
● Retained
earnings
● Depreciation
funds
● Surplus
External
sources
● Share capital
● Debenture
● Public deposits
● Loans from
Banks and
Financial
institutions
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6. • For example: objective is to construct a new
house.
• Total money requirements :1 crore.
brother
friend
private lender
bank loan
own capital

7. Loan financing institution
Loan Financing
Institutions
Commercial
Banks
Short-term
Advance
short-term
Loans
Development Banks
(financial institution)
Direct
Finance
Indirect
Finance
Specialist
Institutions
Domestic
Finance
Foreign
Currency
Finance
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8. Commercial bank
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9. Types of Commercial bank
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13. Development bank
[FINANCIAL INSTITUTION]
FINANCIAL
INSTITUTION
IFCI
ICICI
IDBI
LICUTI
SIDBI
NSIC
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14. IFCI (Industrial finance corporation of India)
It was established in the year 1948 to provide financial
assistance to the medium and large industrial organization.
Functions
1. It provide assistance for industrial infrastructure.
2. Merchant banking operation.
3. It helps in improving the productivity of various factors of
production for the socio-economic objective of the
country.
4. It provides needed guidance in project evaluation,
identification formulation implementation operation etc.
5. It undertakes research and survey for the sake of
industrial development.
6. Advance loan.
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15. ICICI (Industrial credit investment corporation of India)
ICICI was established in the year 1955 as a private
institution for the purpose of assisting long term funds
for capital assets and project promotional services.
Functions
1. Direct subscription to securities.
2. Provide long term loans in rupees.
3. Provides loans in foreign currencies.
4. Guaranteeing payments for credits.
5. Providing credit facilities to indigenous manufactures
6. Leasing of equipment.
7. It conducts techno economic survey for backward
areas.
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16. IDBI (industrial development bank of India)
• IDBI was established in the year 1964 as an apex
lending financial institution and subsequently
reconstructed on the principle financial
institution.
1. Direct assistance to industrial concerns in the
form of underwriting of shares debentures.
2. Soft loan for modernization renovation and
replacement of existing industry.
3. Rediscount bills arising out of sales of
indigenous machinery on deferred payment.
4. Finance exports oriented industries
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17. LIC (Life insurance corporation of India)
This corporation was established in the
year 1956, it provide following financial
assistance to the industries
1. It works in close liaison with the other all
India financial institution in providing finance
directly to the industries.
2. Helping industrial concerns by its
underwriting support.
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18. UTI (Unit trust of India)
• This established in the year 1964, it provides the
following assistance.
1. UTI subscribes to industrial securities and also to
purchase outstanding securities in the
secondary market.
2. UTI is governed by consideration of yield and
security as it has an obligation to earn a
reasonable rate of return for its holders in its
various schemes without exposing customer to
undue risk.
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19. SIDBI (Small industries development bank)
SIDBI was set up in 1989 to functions as the
principal financial institution for the promotion
development and financing of industry in the small
sectors.
1. Refinancing of loan & advances extended by primary
lending institution.
2. Discounting and rediscounting of bills.
3. Extension of risk capital or soft loan assistance to
industries.
4. Technological up gradation and modernization
5. Promotes employment oriented industries especially
in semi urban area.
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20. NSIC (national small industries corporation )
NSIC was set up in 1955 as a public
undertaking. – develop small scale industries.
1. Procuring govt. orders for small scale units.
2. Developing the small scale industries as
ancillaries to large industries.
3. Developing and upgrading technology
particularly for projects based on wastes.
4. Importing & distributing scare raw materials,
components and parts among actual users in the
small scale industries.
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21. Documents requirement for borrowing loan
from financial institution.
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1. Provisional registration
certificate
2. Permission from the govt.
agencies
3. Affidavit
4. Prescribed loan application form
5. Project report
6. Statement of financial standing
7. Tax clearance certificate
8. Partnership deed
9. MOA & AOA in case of company
10. Registration certificate
11. Form A & C issued by registrar of
firms
12. 3 years audited B/sheet & P&L
A/c
13. Qualification & exp. Certificate
of proprietor
14. Power sanction letter from KEB
15. Copy of letter addressed to bank
16. Allotment letter of the land
17. Agreement of the industrial
sheds.
18. No objection certificate from
local authorities.
19. Sketch of the site offered as
securities.
20. Quotation and catalogues
21. Copies of import licence
22. A copy of feasibility report.
23. Photographs of promoters.

22. Capital market
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23. Capital market
 The market where investment instruments like bonds, equities and mortgages are
traded is known as the capital market.
 The primary role of this market is to make investment from investors who have
surplus funds to the ones who are running a deficit.
 The capital market offers both long-term and overnight funds.
• The different types of financial instruments that are traded in the capital markets
are:
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instruments
equity
Credit
market
insurance
Foreign
exchange
hybrid
derivative

24. Types of capital market
Capital
market
Primary
market
Secondary
market
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• It is that market in which shares,
debentures and other securities are sold
for the first time for collecting long –term
capital
• This market is concerned with new issue.
Therefore, the primary market is also
called new issue market.
• The money collected from this market is
generally used by the companies to
modernize the plant, machinery , and
building for extending business, and for
setting up new business unit.
• The secondary market is that market in which
the buying and selling of the previously issued
securities is done.
•Done through the medium of stock exchange.
•Purpose – to create liquidity in securities.
•It encourages new investments.

25. Venture capital
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26. Venture capital
Venture capital is significant innovation of
20th century. It is generally consider as
synonym of risky capital.
Venture capital is new services, the
emergence of which wants towards
developing strategies to help a new class of
new entrepreneurs to translate their business
ideas into realities.
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27. Venture capital
Venture capital is “ equity support to
fund a new concepts that involve a higher risk
and at the same time, have a high growth and
profit”
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 New business investing
 Risky investment
 Not creditor, but become
partner.
 Continuous involvement.
 Objective : Not to get interest,
but Capital gain.

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29. Advantages of venture capital
1. Provide large sums of Equity Finance.
2. Successfully attracting a venture capital new
business.
3. Economic growth.
4. Promoting innovative ideas will be scarce
fund.
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30. Disadvantages of venture capital
1. Risky
2. Become partner.
3. Complex process.
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34. Thank you
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