Essentials of Entrepreneurship: A Practical Approach

First money is provided by the entrepreneur. It is often in the form of sweat equity.

Second money comes from friends and relatives

Third money refers to funds raised from limited partnerships. These are usually private because publicly traded partnerships are now taxed like corporations.

Wealthy individuals, sometimes referred to as angels, often are looking for opportunities provided to them by entrepreneurs.

Venture capitalist, who have fiduciary  responsibility to investors that invest in their venture capital funds, are sources of capital for entrepreneurs. Venture capitalists tend to invest much less on start-up opportunities than they do in companies that are farther along in the development process

Debt capital is also a source of capital. Typically debt capital is not available to a start-up because the company has no collateral to provide the lender. After a company is established, then it can often borrow money based on its cash flows and assets.

Internally-generated financing is also available. The entrepreneur can manage the cash cycle carefully, keep close track of receivables, use trade credit options and eventually through retained earnings.

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