Question

1. What are the two ways, other than revenue/profits bank loans and venture capital, firms get financial capital to replace, expand or create new ventures?

Answer 1

The two ways other than revenue/profits banks loans and venture capital, in which the firms can finance their capital needs are as follows:

a. Capital Markets: There are two ways to raise finance in this case. The first is new share issues which involves companies acquiring a stock market listing for the first time.The second source of finance in this case is rights issue. Thus, capital markets are a good way to raise finance by new companies coming in the market.

b. Business Expansion Scheme funds: There are various schemes in which government provides loans to the new ventures and budding entrepreneurs at cheap rate of interest to promote business expansion and also create new employment.

Thus, apart from bank loans, revenue/profits and venture capital, the firms can also raise funds in capital markets and through business expansion schemes.