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Essay on importance of Financial Capital for Entrepreneurs

Financial resources that affect the success are included in the second category of critical resources, which comprises of money assets and capital of the of the main issue of entrepreneur is to attain the finance in order to initiate and grow a business. Capital is obtained from many ways such as government programs, business angels, and personal savings banks and jeopardizes capital funds. Each of these sources has different result for the owner and also for the business. The important points for success of business is choice of suitable capitalization structure, determination about the sequence of capital sources and easy approach to finance. At same professional level and age, the gross annual income of women is usually smaller than the men before the start of business. This low gross annual income affects the ability of women to invest their own money and to achieve financial capital like credits or bank loans. Researchers suggested that women have refused the most significant resource that is access to capital markets.

There are three reasons of women deprivation in capital markets: first, resource lenders may discriminate women due to outdated gender role beliefs; second, they believe they will be presented with different treatment that will decrease the ratio of lending applications in women business owners and third, they have less equality, skills and experience than men in their business. Mixed results are obtained from the surveys that have examined these suppositions.

There are many issues that are faced by women entrepreneurs. These issues include weaker collateral position, discrimination by financial institutions or other providers and decrease external finance. Those women with longer duration of experience and with university degree in the field of research faced no obstacles in obtaining finance for their business. most of the women entrepreneurs find their ways to reduce the need of capital in the starting stage which subsequently results in the success of their business such as by utilizing ‘boot strapping’ methods. Use of credit card of owner for the expenses of business, taking equipment on rent rather than buy it, use of funds for investment of business, prohibiting the salary of owner and relatives working lower than market salary. Saved earnings or cash flow encourage the business successively as owner experience the accomplishment in private markets. It is reported that even with the increase in growth of women entrepreneurship, many women entrepreneurs ignore private equity, capitals and access to bank loans. Boot-strapping methods that were described above are now offering women to save their financial resources. And this factor has been proved to help women to increase their business success.


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