IGNOU BCOS 185 2026 2027 - Explain the various sources of funds available to an entrepreneur for

Question

Explain the various sources of funds available to an entrepreneur for financing a new
venture. Distinguish between financial and non-financial resource mobilisation.

05 Aug 2026

Answer :

Word Count : 588

Financing is one of the most important requirements for establishing a new venture. An entrepreneur needs funds for acquiring land and buildings, purchasing machinery and equipment, procuring raw materials, paying wages and salaries, marketing products, meeting administrative expenses, and maintaining working capital. The sources of funds available to an entrepreneur can broadly be classified into internal and external sources. Personal savings are the simplest source of finance for a new venture. An entrepreneur may invest his or her own savings in the business. This source does not involve interest or repayment obligations and demonstrates the entrepreneur’s commitment to the venture. However, personal savings may be insufficient for a large-scale business. Friends and relatives can also provide financial support. They may give loans or invest in the business on mutually agreed terms. This source is generally easier to access, particularly during the early stage when formal financial institutions may be reluctant to lend. Commercial banks are an important institutional source of finance. Entrepreneurs can obtain term

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