1.

What are the various sources of finance for a project

manager each of them in details?

Answer: A project manager is the person responsible for leading a project from its
inception to execution. This includes planning, execution and managing the people,
resources and scope of the project. Project managers must have the discipline to
create clear and attainable objectives and to see them through to successful
completion. The project manager has full responsibility and authority to complete
the assigned project.

Sources of finance:

Sources of finance

Internal Source External Source

 Founders personal Investment  Venture Capital

 FFF(Family, Friend, Fools)  Commercial Banks.
 Angel Inventories.  Debt Financing
 Retained Earnings  IPOs (Initial Public Offerings)
 Unsecured Loans  Government Grants.
 Deferred Payments.  Advance from Customers.
 Sale of old asset.

After the project is ascertained, the sources of finances available for meeting the
project cost are to be analyzed and a proper combination of the different sources
shall be chosen that is most suitable for the project. The various sources of finance
can be broadly categorized namely, internal source and External source of finance.
I. Internal Source of finance:
It includes certain sources are as follows;
a) Founder’s personal Investment: When starting a project, the first investor
should be the project manager himself—either with his own cash or with
collateral on his assets. This proves to investors and bankers that you
have a long-term commitment to the project and that you are ready to
take risks.

b) FFF (Family, Friends, Fools): This is money loaned by a spouse, parents,

family or friends. Investors and bankers consider this as "patient capital",
which is money that will be repaid later as your business profits increase.

c) Angel Investors: Angels are generally wealthy individuals or retired

company executives who invest directly in small firms owned by others.
They are often leaders in their own field who not only contribute their
experience and network of contacts but also their technical and/or
management knowledge. Angels tend to finance the early stages of the
business with investments. Institutional venture capitalists prefer larger
investments. In exchange for risking their money, they reserve the right
to supervise the company's management practices. In concrete terms, this
often involves a seat on the board of directors and an assurance of
transparency. Angels tends to keep a low profile. To meet them, you have
to contact specialized associations or search websites on angels.

d) Retained Earnings: Retained profit is by some way the most important

and significant source of finance for an established profitable business.
When a business makes a net profit, the owners have a choice: either
extract it from the business by way of dividend, or reinvest it by leaving
profits in the business. Retained earnings not all profits are distributed to
shareholders the company retains a proportion as reserves. This is usually
the most significant source of equity finance, costs far less than external
sources that charge interest and can be distributed as the company sees
fit.
 e) Unsecured Loans: Bank loans are most commonly used sources of
finance for any project. Consider the fact that all banks offer different
advantages, whether it’s personalized service or customized
repayments. It’s a good idea to shop around and find the bank that meets
your specific needs.

f) Deferred Payments: Deferred payment is an agreement between the

lender and borrower allowing the borrower to take possession of goods
immediately and start making payments in the future. At the time
supplier of any asset offer a deferred payment facility under which
payment of asset can be made after a certain period of time as agreed
upon by the buyer and seller at the time of purchase. In order to get
deferred credit a person has to furnish bank guarantee and may even have
to mortgage certain assets.

g) Sale of Old Assets: Another internal source of finance is the sale of

assets. Whenever business sells off its assets and the cash generated is
used internally for financing the capital needs, we call it an internal
source of finance by the sale of assets. The money came by selling fixed
assets that are no longer needed. Many companies have surplus
vehicles or machinery they can easily sell off especially in a
replacement scenario – a company could sell its delivery truck in
partial payment for a new one, for example. The major drawback is that
it's a slow method of raising finance. Many fixed assets are illiquid; old
manufacturing equipment or factory buildings may be hard to sell
because of a lack of interested buyers in the market. There's also a limit
to the number of fixed assets a business can sell without it impacting
operations.

II. External Source of Finance:

It includes various external factors are;
a) Venture Capital: The first thing to keep in mind is that venture capital is
not necessarily for all entrepreneurs. Right from the start, you should be
aware that venture capitalists are looking for technology-driven
 businesses and companies with high-growth potential in sectors. Venture
capitalists take an equity position in the company to help it carry out a
promising but higher risk project. This involves giving up some
ownership or equity in your business to an external party. Venture
capitalists also expect a healthy return on their investment, often
generated when the business starts selling shares to the public. Be sure to
look for investors who bring relevant experience and knowledge to the
business.

b) Commercial Banks: A commercial bank is a financial institution that

helps community members open checking and savings accounts and
manages money market accounts. However, as the name implies, a
commercial bank also has a broader, business-oriented focus. Most
commercial banks offer business loans and trade financing in addition to
the more traditional deposit, withdrawal and transfer services. With such
a diverse business profile, the sources of funds in commercial banks are
varied.

c) Debt Financing: Debt financing occurs when a firm raises money for
working capital or capital expenditures by selling debt instruments to
individuals and/or institutional investors. In return for lending the money,
the individuals or institutions become creditors and receive a promise that
the principal and interest on the debt will be repaid. Debt financing, by
contrast, is cash borrowed from a lender at a fixed rate of interest and
with a predetermined maturity date. The principal must be paid back in
full by the maturity date, but periodic repayments of principal may be
part of the loan arrangement. Debt may take the form of a loan or the sale
of bonds; the form itself does not change the principle of the transaction:
the lender retains a right to the money lent and may demand it back under
conditions specified in the borrowing arrangement.

d) IPOs (Initial Public Offerings): An initial public offering (IPO) refers to

the process of offering shares of a private corporation to the public in a
 new stock issuance. Public share issuance allows a company to raise
capital from public investors. The transition from a private to a public
company can be an important time for private investors to fully realize
gains from their investment as it typically includes share premiums for
current private investors. Meanwhile, it also allows public investors to
participate in the offering. A company planning an IPO will typically
select an underwriter or underwriters. They will also choose an exchange
in which the shares will be issued and subsequently traded publicly.

e) Government Grants: Government agencies provide financing such as

grants and subsidies that may be available to your business. A
government grant is a financial award given by the federal, state, or local
government authority for a beneficial project of some sort. It is
effectively a gift: It does not include technical assistance or other
financial assistance, such as a loan or loan guarantee, an interest
rate subsidy, direct appropriation, or revenue sharing. The grantee is not
expected to repay the money.

f) Advance from Customers: Sometimes businessmen insist on their

customers to make some advance payment. It is generally asked when the
value of order is quite large or things ordered are very costly. Customers’
advance represents a part of the payment towards price on the product
which will be delivered at a later date. Customers generally agree to
make advances when such goods are not easily available in the market or
there is an urgent need of goods. A firm can meet its short-term
requirements with the help of customers’ advances. It may be possible
to successfully alter customer payment terms to require customers to
pay all or a portion of their ordered amounts in advance. However,
this approach can also send customers toward competitors who offer
looser credit terms.