A Basic Course in Entrepreneurship

7/30/2019 A Basic Course in Entrepreneurship

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A

BASIC COURSE

INENTREPRENEURSHIP

Leslie Nii Tete Annan


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A Basic Course in EntrepreneurshipVol. Leslie Nii Tete Annan

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Table of Contents

1. ENTREPRENEUR ........................................... 4

Why start a business? ................................................ 6

Qualities of an entrepreneur .................................. 9

2. WHY SMALL BUSINESSES FAIL IN

GHANA! .................................................................... 133. HOW NOT TO FAIL AS AN

ENTREPRENEUR! ................................................20

4. BUSINESS PLANNING............................... 23

5. TIME MANAGEMENT................................. 24

6. EMPLOYMENT.............................................. 26

Self-employment ................................................. 27

Wage Employment ............................................. 29

Unemployment ..................................................... 31

Causes of Unemployment ................................. 347. BUSINESS COMMUNICATION ............... 37

Forms of communication................................... 38

Types of Communication................................... 39


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A Basic Course in Entrepreneurship Vol.1Leslie Nii Tete Annan

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Barriers to communication in Business .......... 44

8. SMALL SCALE BUSINESS ......................... 46

9. SOURCES OF BUSINESS FINANCE ...... 49


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1. ENTREPRENEURAn entrepreneur is a person who creates a new

business in the face of risk and uncertaintyfor the purpose of achieving profit and

growth by identifying opportunities and

assembling the necessary resources to

capitalize on those opportunities. The

entrepreneur therefore combines the factors of

production to produce goods and services with

the aim of making profits.

TYPES OF ENTREPRENEURS

1. The Artisan Entrepreneur: This entrepreneurmay have technical job experience but may

lack essential skills like communication and

management. An example is a carpenter.

Some characteristics of such an entrepreneurare:

I. He rarely delegates authority


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II. He uses little capital resource to createand operate the business

III. He does the selling personallyIV. His planning focus is usually limited to

the present.

2. The Opportunistic Entrepreneur: Thisentrepreneur supplements his/her technical

expertise with managerial and

administrative skills. The contractor is anexample.

Some characteristics of such an entrepreneur

are:

I. He often delegates authorityII. He mobilizes more capital resource toocreate and operate the business than the

artisans

III. His planning focus goes beyond thepresent, he plans for the future


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FUNCTIONS OF AN

ENTREPRENEUR

1. Takes risks to make use of theseopportunities

2. Introduces innovations- newness, variationor uniqueness

3. Mobilizes capital for a business4. Organizes labour and production5. Plans ahead- aiming to limit the factors of

uncertainty and increase his chances of

success

6. Perceives opportunities in the environment7. Sells his products at a profit. Without profit

there will be no entrepreneur. It is both thereward and motive for entrepreneurship

WHY START A BUSINESS?

You start business:

1. To make a lot more money2. To get out of a professional rut

Bureaucracy


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3. To be ones own boss4. To prove to others that one can do it5. To advance technology, society etc.6. To develop and deploy talents one feels that

he has outside his specialization7. To compete with somebody


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Motivations for Starting a Business

Pull Influences

a. Desire for independenceb. Desire to make use of an opportunityc. Turning a hobby or previous work

experience into a job

d. The possible profit you will makePush Influences

a. Redundancy or being out of workb. Unemployment (or threat of)c. Disagreement with previous employer


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QUALITIES OF AN ENTREPRENEUR

1. He is an Active rather than a reactivepartaker in his own business. He makes

the most strategic decisions and sees to itthat he is part of the team that is

working on achieving it.

2. An entrepreneur has a Bold self-confident personality. An entrepreneur

with relevant knowledge, skills,

information and having a successful

experience in the past possesses great

degree of self-confidence. He thus

confidently puts forward his case andgets needed help or gets people to

patronize his products and services.

3. Innovativeness is one of the qualities ofan entrepreneur. This quality helps him

to create new products and services tobeat competition. He uses feedback and

the habit of learning from mistakes and

setbacks, to create new products and

services.


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4. Determined: shows itself in his eagernessto make the enterprise succeed and a

determination to organize the resources

necessary for success. He does not easily

become disappointed, discouraged ordepressed by setbacks or failures. He is

always optimistic in his outlook.

5. Although he likes challenges, he prefersnot to gamble. He is a Moderate Risk-

Taker. Moderate risks are those whichprovide a reasonable and challenging

chance of success.

6. He has a sense of personal responsibility.He takes responsibility of the outcome of

his actions and decisions. In the process ofdecision making he commits his efforts,

knowledge, skills and investments.

Should he fail, therefore, he only has

himself to blame, not his workers or his

clients. And should he succeed, he onlyhas his entrepreneurial skills to attribute

his success.


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7. He seeks concrete feedback onperformance. He wants to know how he

is doing-whether good or bad. The

feedback may be in the form of profits,

sales, percentage control of the market,size of the firm in terms of number of

workers, volumes of production, rate of

growth and customers reaction. Thusthey are excellent listeners.

8. He is more concerned with task ratherthan people. He cares about what is

supposed to be done first and then

about the people who will do it second.

That is why he puts profits and business

goals ahead of personal rivalries and

hostilities. He is objective and always tries

to keep personal relationships apart

from business matters. He shuns

favoritism and nepotism.

9.

He is achievementoriented. It is what hegets in the long run that they are

concerned with. He tends to like the

feeling of having accomplished

something by his own efforts. More often


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he competes on the basis of excellence. A

Successful entrepreneur possesses a desire

to overcome hurdles, to solve problems

and to reach his goals. He is extremely

persistent, but he is also very realistic inrecognizing what he can and cannot do.

By knowing the past and present, he is

able to predict the future events about

the business.

10.He tolerates uncertainty. Well awarethat there is great uncertainty with new

start-up businesses, he is comfortable

with it. That he wont make money earlyin his business doesnt push him awayfrom his goal.

11. He is self-starter. When opportunitystrikes him he takes the initiative to

work on it or not. Successful

entrepreneur are experienced, including

having intimate knowledge oftechnology and market place in which

they will compete and have some

general management skills. He exerts

influence without formal power. He


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knows when to use logic, and when to

persuade, when to concede and when to

maintain his stance.

2. WHY SMALL BUSINESSES FAIL INGHANA!


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There are countless reasons why small businesses

fail, but over here we will discuss a few we

consider pertinent.

A. Lack of ExperienceSome entrepreneurs go into SSBs with the

philosophy of What- Kwame-is-doing-I-can-

also-do. They follow their pride and desire to

compete. They then enter into businesses theylack the requisite experience for. If you want to

establish a school, you dont do so because you

have the money. You should have the

experience of managing a school or an

establishment similar to school.

Furthermore entrepreneurs are so caught up in

their lofty ideas that they disdain the need for

experience in the field they are pursuing.

B. Poor Financial ControlThey must admit it. SSB owners must own

up to their financial illiteracy. Most business


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owners especially the artisan entrepreneurs lack

basic accounting and book keeping skills that

go against them in the long run. They

consequently misappropriate money that comes

into the business. On other occasions too since

they have everything under their control -

including the income being gained, they use the

business resources for personal interests. This

creates a shortage in terms of the money thebusiness accrues in the long run.

C. Management IncompetenceYes, you could have a vision for a grand

business and might also have a lot of energy tosee to its operation. Nevertheless, when a

management expert is lacking in the

organization then the company is bound to fail.

D. Lack Of CapitalEven though SSBs are the easiest businesses to

start, people still dont find the capital to start


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their own business. This most surely is owned to

the fact that Ghanaians have a poor saving

habit. Else most adults by age thirty could have

some savings to rely on to start their own

business in Ghana.

Capital for a business comes in two forms,

working capital and seed/starting capital. These

different capitals are all important for the

business to succeed. When you lack the seed

capital the enterprise doesnt even come to

being. And when you have the seed capital but

do not have the working capital to sustain it

then your initial efforts would be in vain.

Getting money in the form of loan from other

individuals or institutions is rather a pain in the

neck for up-and-coming entrepreneurs. You lose

so much time and money in the process of

securing a loan. When secured, the loan has aninterest rate that eats into your income with

each passing month.


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E. Careless Customer CreditAn advantage consumers think Small Scale

Business have over other business is the credit

owners give to customers who patronize their

products. However when the credit is given,

poorly recorded or unwisely monitored credit

becomes bad debt for the business owner.

F. Over investing in fixed AssetsHaving fixed Assets is good for a business. It is

good because at a time you need a loan for

expansion or what not these fixed assets like the

building and equipments could serve ascollateral. Yet when you over invest in fixed

assets you leave less money for the operation of

the business. There is need for real cash to

operate the business. On the other hand fixed

assets too could be destroyed over night.

G.Failure to Plan


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It is said that, failing to plan is planning to fail.

Most small business owners tend to think that

the small size of their business is reason enough

not to have a Business Plan. But this is a wrong

notion since every business that seeks to make

profit should go by a plan. Lacking a business

plan gives room for misuse of income and

unnecessary expenditure. These two problems

can sink any business.

H.Inability to make theentrepreneurial transition

The entrepreneurial transition is the point where

the custodian of the business relinquishes some

or full control of the business to others so that

the business would thrive better in the

competitive environment. Sometimes

entrepreneurs are so tied to their companies

that even their death could spell the collapse of

their companies. However entrepreneurs are

advised to learn to give up some of the control


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of the organization to experts for their own and

their business sake.


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3.HOW NOT TO FAIL ASAN ENTREPRENEUR!

A. Know Your Business in DepthA man who knows what he is about hardly

falters. An entrepreneur- whether artisan or

opportunistic, is called upon to know his business

in depth. New technologies and techniques drop

in an entrepreneur who yearns to be successful

doesnt allow these things to pass him by.

Knowing more about what you do makes you a

formidable opponent to your competitors.

B. Prepare a Business PlanIt is very necessary to have a plan. You take any

route if you dont know where you are going.

The future of your business shouldnt be onlyclear in your mind but also it must be written in

black and white on paper. Have a documented

plan. Seek the advice of a consultant if you


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cant write one because running a business is as

complicated as building house, no matter the

size you still need to have a plan.

C. Manage Financial ResourcesGood financial discipline helps you to avoid

mismanaging you already scarce resources. You

need not take it for granted that your business

might be making profit or not. Seriously keeprecords of cash that flows into and out of the

business. This tells you whether you are actually

in business or you are playing cha-cha with

your money.

D. Understand Financial StatementsA small business owner should learn to

understand some basic accounting to make

head and tail of financial statements. When youunderstand financial statements you can make

strategic plans for the business.


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E. Learn To Manage PeopleEffectively

The human resource in the company is

considered as a vital asset of the organization.

This being the case, the entrepreneur should

learn to communicate and interact with his

workers for the progress of the organization. If

mismanaged, people could bring down a

company with gossip, unnecessary competition

and envy.

F. Keep In Tune with YourselfMost often entrepreneurs are the life wire oftheir businesses. Many businesses have folded up

with the death of the owner. But entrepreneurs

are urged to delegate some unimportant tasks

so that they dont end up doing everything and

suffering for it.


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4.BUSINESS PLANNINGA Plan is the conception of objectives or an aim,an end or a goal that you deliberately decide to

accomplish and how you will go about to do

this.

A BUSINESS PLAN

A business plan is a written document of how

you will do your business, who you will do yourbusiness, what you will do it with, where you will

do it and why you will do it.

IMPORTANCE OF A BUSINESS PLAN

1. It focuses attention on objectives in termsof mission and vision of the business.

2. It facilitates control of the business assetsand liabilities.

3. It gives room for innovation andcreativity.

4. It helps in better co-ordination so thatevery employee does his/her work

effectively and efficiently.


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5. It eliminates uncertainty in businessactivities.

ADVANTAGES OF PLANNING

1. Planning brings about flexibility inbusiness operation

2. You avoid pressure3. You work to your maximum ability4. It enables workers to produce more

within a short time.

5.TIME MANAGEMENTHe who is faithful in what is least is faithful alsoin much; and he who is unjust in what is least is

unjust also in much.

Luke 16:10

Time Management is defined as becoming more

efficient at doing things that are important

within a given period of time.


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Characteristics of someone who manages histime well

a. His work is of a great qualityb. He produces/ does more than his colleagues

in a given time.c. He does/accomplishes whats important.

How to Manage Your Time Well

Appropriate delegation

Dont give the very important work tosomeone else, yet dont be afraid to askfor help on a given task.

Broach difficult tasks first

You attack tasks that you know you can

tackle but seem very difficult, firstly.

Control Interruption-

Handle interruptions to suit you dont letthem handle you. Learn to say nograciously to tasks that are not relevant

at a particular moment in time.

Define the task

How long will the task take?

What to do about the task?


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Whom to deal with in accomplishing the

task?

Evaluate your used time, what do you and how

do you use your time? Do you do more work oryou play more?

Feel at ease; enjoy yourself while getting at a

goal

Go D & C: Divide and conquer tasks that seem

overwhelming, larger than your presentcapacity.

Have alternatives for how you spend time

Institute some free time. Where there is a

prospect of free time you dont feel anxiouswhen you are busy.

6.EMPLOYMENT


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Some Keywords

Employee is someone who works for aperson or an organization in return for

payment. Employer is an individual or an

organization that hires or recruits others

to render service in the name of the

company he owns.

Self-employment

It is when an individual combines the factors of

production to come out with a product or a

service that meet the needs or wants of the

market.

Advantages of Self employment

1. There is only one person taking decisions-this should lead to decisions being made

quickly.


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2. As soon as an element of the marketalters, the entrepreneurs recognizes it

and acts quickly

3. A lack of chain of command and thesmall size of the organization should

mean that the entrepreneur has control

over the Workforce.

Disadvantages of Self-employment

1. If the organization grows, one person willnot be able to cope with the increase

volume of decision

2. There is inadequate capital for one-manbusiness, because the owner may find it

difficult to raise large sums of money due

to lack of collateral security.


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3. The liability of the owner is unlimitedbecause, if the owner incurs heavy losses,

his assets can be sold to pay off the debt.

4. The success of the business dependsmostly on how active the owner is.

Consequently in the event of sickness,

retirement or death of the owner the

business might collapse if there is nobody

to manage it.

Wage Employment

Wage employment is when an individual is

willing and prepared to offer his skills and time

in exchange for a salary or a wage from an

employer. This employer could be an individual

or an institution. A Secretary working in

Procredit Savings and Loans Company Ghana is

in wage-employment.

Advantages of Wage Employment


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1. The employees get a token in the formof salaries or wages at an agreed period.

2. The management and the success of thebusiness do not solely depend on theemployee though he has a part to play

to uplift the image of the business and

also contributes too to the achievement

of the companys goals.

3. He has the chance to seek for a new jobif he wants to. That is, he can choose to

leave or stay in the business if there is no

job satisfaction.

Disadvantages of Wage Employment

1. Any abnormal profit only accrues to theemployer. Since you are given

remuneration at a given time, the

employer can choose to offer you a

bonus to serve as a motivation if he

wants.


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2. With the wage employment yourfreedom is sometimes restricted because

your employer can sometimes let you

work on non-working days such as a

weekend or a holiday.

Unemployment

This is where people are willing to work at the

current wage rate and actively looking for workbut cannot find one. This can also be described

as proportion of the labour force that is

involuntarily without work.

Types of Unemployment

Seasonal UnemploymentThis is the type of unemployment that is mostly

experienced by companies whose production is

structured according to seasons and changes.Some Ghanaian agricultural farmers are

confronted with seasonal unemployment.


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Frictional UnemploymentWhen there is change in the methods of

production frictional unemployment could

occur. For instance as technology has increased

some companies start to employ the use of

machines to do certain jobs instead of humans.

The messenger who used to carry hand written

and spoken message from one worker to

another or from one company to another is no

more in employment. This is because the fax

machines as well as telecommunications

machines have been introduced in these

companies. Also the introduction as the combine

harvesters, bulldozers into agricultural

operations has replaced farm labourers. So its

said that the messengers and the farm laboures

are frictionally unemployed.

Structural UnemploymentThis is the type of unemployment caused by

technical changes that brings about changes in


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the composition of demand or pattern of

demand. Changes in demand due to the

invention of new commodities or even changes

in taste and fashion may bring about declining

industries. For example a Ghana grown rice

industry collapses because people are no more

interested in buying Ghanaian rice. The

employees working in this industry would find

themselves without work. They are then in asituation of structural unemployment.

Cyclical UnemploymentAlso known as Mass Unemployment, Cyclical

Unemployment happens anytime there iseconomic depression in a country. Economic

depression is a situation where the demand for

goods and services are reduced because even

the means to pay for these things are small or

no more.


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Causes of Unemployment

1.

Lack of Skills

Employable skills are lacking in Ghana. You see

many Ghanaians who boast of diverse skills but

they lack the requisite ones such as Information

Communication Technology and Interpersonalskills to help them get and maintain an

employment.

2. Lack of Entrepreneurial skillsWhile there are so many graduates from

tertiary institutions of education, there are not

many who have the entrepreneurial skills to

establish and run their own business.

3. The Introduction of newtechniques/Technological

advancement


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When there is an introduction of new techniques

workers especially lay ones are declared

redundant. Machines then come to the work

that they used to do at the work place.

4. Lack of capitalThose who lack employment almost always lack

the capital to start their own businesses. So in

the long run they remain the unemployed.

5. Too Few CompaniesOur technical and secondary schools continue to

churn out graduates, yet only few vacancies- if

any exists at all- can be found in the companies

around. Ghana for many years has remained

more of a consumer than a producer and for

that matter the import margin is greater than

the export margin. Where a country is aproducer you find more factories and companies

around, which inevitably provide employment

opportunities for the youth.


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6. Rural Urban DriftThe rural urban drift has caused over

population and a high demand for employment

in the cities and towns. The youth desert their

rural dwellings into the urban areas seeking

white-collar jobs that dont exist.


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7.BUSINESSCOMMUNICATION

Generally, the exchange of information between

people, e.g. by means of speaking, writing, or

using a common system of signs or behavior is

considered communication. Communication can

also be defined as the process by which peopleshare information, ideas and attitudes.

Importance Of Communication

1. Communication makes it possible formanagement to give instructions tolower level workers to work

2. Workers problems and grievances can bemade known to management

3. Communication helps workers to knowall decisions taken by management thatreally affects them and the firm as whole

4. Through communication, a report onwork done is sent to management for

control purposes.


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5. Communication makes it possible forworkers to make suggestions or decision

to management as to the best method

of work.

6. Communication aids in the appraisal ofemployees. Through effective

communication, management is able to

evaluate the work of subordinates, give

feedback on performance, and jointlydraw plans to eradicate any weakness as

well as improve their strength

Forms of communication

Formal communication

This is the official means of sending information

relating to work. It takes the form of letters,

memoranda, report and speeches presented at

meetings, workshops and seminars.

Informal Communication

This is the information given without the

authority or permission of any superior. Informal

communication takes place among superiors,


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subordinates as well as peers. It takes the form

of rumour or gossip.

Types of Communication

1. Internal CommunicationIt takes place within an organization. Internal

communication occurs among employees,

between a manager and his subordinates,

between a director and his departmental heads.

This type of communication originates and ends

within the same organization, takes the form of

memo or letter.

2. External CommunicationIt takes place between an organization and the

outside world. It may be between a business

and its suppliers, creditors, customers, the

government etc. It originates from themanagement of one organization to an

individual or group of individuals outside the

establishment or from one management to

another companys managements.


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Business Communication Tools

The primary tools for communicating

information in business include e-mail messages,memos, letters, reports, phone calls, meetings,

and conversations. To determine which is the

best to use in a given situation, start by asking

yourself the following questions:

How much information do I have to passalong?

How many people will receive themessage?

How quickly does it need to reach them? How much time do the recipients need

to respond to it?

How formal should the presentation be? Is the message confidential? How are people likely to respond to it?

E-mail Messages


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Because of its speed and informality, e-mail is

ideal for routine communication between

coworkers. For instance, an e-mail message is

usually the best means of announcing a new

policy, introducing a recent hire, informing

colleagues of a meeting time, and reminding an

employee of an approaching deadline.

E-mail messages are also useful for day-to-day

or extremely timely exchanges with peopleoutside the company. Because of their low cost,

they often are preferred for communicating

with overseas contacts.

E-mail EtiquetteExchanging e-mail messages is like having a

conversation without seeing the face or hearing

the voice of the other person. You have only the

persons words, but none of the visual and

auditory cluesinflections, facial expressions,and gestures, for instancethat help explain the

underlying meaning of the words.

Because of the impersonal and often informal

nature of e-mail, the tone and substance of

messages can easily be misinterpreted. To help


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avoid confusion and hurt feelings, Internet users

have developed a loose set of rules known as

netiquette (network etiquette), including

guidelines for being a responsible and courteous

e-mail correspondent.

Memos

Although e-mail messages are now used instead

of memos for most intercompany

communication, memos are still suitable for

notes sent to people higher in the company

hierarchy, especially in conservative companies.

The memo is also appropriate for lengthy,

formal communications to coworkers that may

eventually be circulated to your supervisors or

to contacts in other companies.

Letters

The letter is now used primarily for formal

correspondence with clients, customers, and

others outside the company, particularly people

you have not met.


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Imagine, for instance, that you need to ask for

advice or information from someone you do not

know personally. The person will likely give a

letter more attention than an e-mail message

because a letter conveys an added element of

formality and courtesy.

Reports

A complex document of more than ten pages,

especially one that will be shown to outside

contacts, is best presented as a report. A routine

report can be easily produced using a word

processor and a laser printer. Important reports

for potential clients, stockholders, or others you

might want to impress usually should be

professionally designed and printed, often in full

color on heavy or glossy paper.

Phone Calls, Conversations, and Meetings

The main advantage of a phone conversation is

that it allows both parties to respond to each

other immediately. If you and a coworker have


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several questions for each other, asking them in

a single phone call is usually less time-consuming

than exchanging a long series of e-mail

messages.

Personal matters or topics that might elicit a

highly emotional response are best discussed in

person. As common sense will tell you, sending

an e-mail or memo reading Youre fired! is not

the most delicate or responsible way of dealingwith a difficult situation.

Face-to-face meetings are usually the safest

way of communicating confidential information.

Meetings are also useful when a quick group

decision is needed on a particular problem orissue. Important side benefits of meetings are

that they allow employees in different

departments or divisions to become acquainted

and can often foster a sense of shared mission

among coworkers.

Barriers to communication in Business

1. Psychological:


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a. Semantic problems- meaning ofwords that differ in peoples minds.

b. Emotional hang-ups-anger,frustration and excitement.

c. Stereotyping- Prejudice,discriminationd. Distorting information intentionally

for personal gain

2. Physiological:a. Bad handwritingb. Hearing problemsc. Bad eyes

3. Physical: Noise in the environment,outdated equipment, poor or bad

lighting

4.

Cultural: Different spoken language,meta-linguistic incompetence that

affects your understanding of innuendoes

and metaphors.


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8.SMALL SCALE BUSINESSCHARACTERISTICS OF SMALL SCALEBUSINESSES

A. A business that employs from one totwenty nine (29) people. It may also be a

business that employs ten or fewer

people with an initial capital of 25

Million Ghana Cedis

B. The managers of small scale businessesare its owners who are accountable and

responsible to themselves.

C. They are responsible for all liabilityincurred by the business and of course

they are the sole beneficiaries of the

profits.

Examples of Small Scale businesses are tailoring,

carpentry, weaving, carving, retail outlets,communication and catering services.

ADVANTAGES OF SMALL SCALE BUSINESS

1. Easy and simple formation, since littlecapital is needed to start it.


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2. Quick decision-making: owner does notneed to consult anybody in taking a

decision

3. There is the sense of independencebecause the manager is the owner andhe report to no one.

4. Enjoyment of privacy: Business Plans aremostly kept secret by the owner since

hes not compelled by law to publish.

5. Theres flexibility: one can react quicklyto change and can adopt his or her

operations to local conditions.

6. Opportunity to be a jack of all trades.On is able to acquire varying degrees ofknowledge and skill.

7. Customers are offered goods and servicesto their specification. That is according to

the quality and quantity that suits them.

8. The nation gains by means of theinnovation and creativity that Small

Scale Businesses introduce.


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DISADVANTAGES OF SSBS

1. Inadequate financial capital: they donthave collateral security to qualify them

for loans from the banks.

2. Inefficient management: Lack ofmanagement knowledge and expertise

on the part of the owners.

3.

Theres no advantage of large scaleproduction hence theres no advantageof larger profit margin.

4. Bad judgement can lead to collapse andthis comes as a result of sole

responsibility.

5. Owners of SSBs usually depend onoutmoded technology since they cantafford the new technology.


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9.SOURCES OF BUSINESSFINANCE

This refers to the various means by which peopleor organization can get money to operate a

business. There are two sources namely short

term source and long term source.

SHORT TERM SOURCES

1. Trade Credit: This involves the purchaseof products that is backed by a promise

to pay later.

2. Loans: they are either short-term orlong-term money borrowed by theentrepreneur form financial institutions

or individuals. Interest is charged on a

loan. There is need for collateral for large

sums.

3. Overdraft: A customer of a bank isallowed to withdraw more money than

that which is in his account to a certain

limit. Interest is charged only on the

actual amount overdrawn. There is need


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for collateral security in case of large

sum.

4. Personal Savings: An entrepreneur mayuse his past savings at a bank or with asusu collector.

5. Venture Capitalist: Investment groupswho are interested in ingenuous and

creative ideas to develop into profitable

businesses.

6. Leasing: some organizations lease outsome fixed assets which are lyig idle and

would not be used immediately at a fee.

7. Hire purchase: under this theentrepreneur undertakes (promises) topay for items purchased in installments

after an initial deposit has been paid.

The entrepreneur (here the buyer) takes

the product completely after paying the

last installment.

8. Gifts from friends and family membersare short-term sources of finance.


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LONG TERM SOURCES

1. Shares: usually for large companiesshares (units of a companys capital) are

bought by investors (shareholders).

2. Debentures: These are securedtransferable loan stocks and are usually

secured against an asset of a company so

that should the business fail to pay them

back they can lay claim to the asset.

3. Sale of Assets: the company sells someassets to obtain some required cash.

4. Retained Profits: This involves puttingaside part of the net profit to beploughed back into the business.

5. Sale and Lease Back: A company couldsell its buildings or assets for a capital

sum and at the same time, lease the

asset back for its own use form thepurchaser for a long term at a specificrent.

A Basic Course in Entrepreneurship

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