Introduction

A story that sets the stage

• Mr Anil Singh has run a successful restaurant for the last two years — the excellent food made it popular quickly. Encouraged by this success, he now wants to open a chain of similar restaurants at different places, but his own personal funds are not enough to cover the expansion.
• His father suggests he could take on a partner (the owner of another restaurant), who would bring in more money — but that would also mean sharing profits and control. He is also considering a bank loan, but is unsure how and where to raise additional funds.
• Talking it over with his friend Ramesh, Anil learns about other methods too, such as issuing shares and debentures — options open only to a company. Ramesh cautions him that every method has its own advantages and limitations, and the right choice should depend on factors like the purpose and the period for which the funds are needed. Anil wants to learn about all these methods — exactly what this chapter sets out to explain.

Every business needs money — to be born and to keep running. This chapter maps the different sources from which a business can procure funds, both for starting up and for day-to-day operation and growth.

For each source you will learn:

• Its meaning — what the source actually is and how it works.
• Its advantages (merits) and limitations — because no single source is perfect.
• The factors that decide which source is suitable in a given situation.

Why this matters: anyone who wants to start or run a business must know where money can be raised and the relative strengths and weaknesses of each option. Only then can a sensible, well-matched choice be made — the wrong source can burden a firm even when funds are available.