INTRAPRENEUR

AN INTRAPRENEUR IS AN INSIDE
ENTREPRENEUR, OR AN ENTREPRENEUR WITH
IN A LARGE FIRM, WHO USES
ENTREPRENEURIAL SKILLS WITHOUT INCURRING
THE RISK ASSOCIATED WITH THOSE ACTIVITIES.
 THEY ARE USUALLY EMPLOYEES WITHIN A
COMPANY WHO ARE ASSIGNED TO WORK ON A
SPECIAL IDEA OR PROJECT, AND THEY ARE
INSTRUCTED TO DEVELOP THE PROJECT LIKE AN
ENTREPRENEUR WOULD.INTRAPRENEURS
WOULD HAVE THE RESOURCES AND
CAPABILITIES OF THE FIRM AT THEIR DISPOSAL.
 ENTREPRENEUR & INTRAPRENEUR
Differences
(difference) Entrepreneur Intrapreneur

An entrepreneur is independent in his operations An intraprenuer is dependent on the entrepreneur, i.e.

the owner.
Dependency

An entrepreneur himself raises funds required for the Funds are not raised by the Intrapreneur.
enterprise.
Raising of Funds

Entrepreneur bears the risk involved in the business. An intraprenuer does not fully bear the risk involved in
the enterprise.
Risk

An entrepreneur operates from out side On the contrary, an intraprenuer operates from within
the organization itself.
Operation

An entrepreneur begins his business with a newly set up An intrapreneur sets up his enterprise after working
enterprise. someone elses organization.
Orientation

As an entrepreneur establishes new business, so he does An intrapreneur establishes his business after gathering
not possess any experience over the business. experiences through working in the other organizations.
Experience
12-06-2017 5
Sources of finance
Introduction:
Decide which
assets to buy

To decide Determining
what is total
sources to
tap the total
Decision investment
required for
investment. making buying
assets.

How much
working
capital
required.
 Parameter for choosing sources of
fund
Cost of source of fund.
Tenure.
Leverage planned by the company.
Financial condition prevalent in the economy.
Risk profile of both the company as well as the
industry in which the company operates.
 Classification according to term
finance
Short term finance.
Medium term finance.
Long term finance.
 Short Terms Finance
Short term finance are required primarily to
meet working capital requirements.
The focus is on maintaining liquidity at a
reasonable cost.
 Working
Capital
finance

Commercial
Trade Credit
Paper
Short
Term
Finance

Inter-
Factoring Corporate
Deposits
 Working Capital Finance By
Commercial Banks
Commercial banks grants short terms finance to
business firms which is known as Bank Credit.
Bank Credit may be granted in the following
ways:-
Loans
Purchase/ Discounting of bills.
Cash Credit
Over draft
 Trade Credit
Trade credit represents credit granted by the
suppliers of goods, etc. as an incident of sale.
Merits Demerits
Credit for the purpose Less flexible
of raw material or
finished goods.

No security
No interest payable
 Inter Corporate deposits
A deposit made by one company to another is
called as inter-corporate deposit.
It is generally for working capital funding & is
for period not exceeding six months.
 Factoring
Factoring is an agreement in which receivable
arising out of sale are sold by a firm (client) to
the factor (a financial intermediary).
 Commercial Paper (CP)
Commercial paper is an unsecured money
market instrument issued in the form of a
promissory note.
 Advantages
High credit ratings
Flexibility.
Provides exit options.
Disadvantages
Limited applicability.
Low bank credit limits.
A high degree of control.
 Medium Term Finance
Medium term finance is defined as money
raised for a period for 1 to 5 years.
The medium term funds are required by a
business mostly for the repaired and
modernizing of machinery.
 Medium Term Finance

Commercial
Banks & External Euro &
Lease Hire
State Commercial Foreign
Financing Purchase
Financial Borrowings Bonds
Institutions
 Lease financing

It is a contract In which the assets is purchased

initially by the lessor(leasing company) and
thereafter leased to the user(leasee company)
who pays a specified rent at periodical intervals.
Advantages & Disadvantage
The holder only pays Commitment to contract
for use. for entire valid period.

Better liquidity. Higher fixed cost per

month.
Fixed rate.
More expensive than
Minimal sales risk. purchase.
 Hire Purchasing
Hire purchase transaction, the goods are
delivered by the owner to another person the
agreement that such person pays the agreed
amount in the periodical installment.
Advantage Disadvantages
Cheaper than a Higher monthly
(unsecured) personal payment;
loan.
relatively quick. hidden fees
Deposits are lower than
with personal loans.
 EXTERNAL COMMERCIAL
BORROWING::--
1. ECBs refer to commercial loan in the form of bank
loans, buyers credit, suppliers credit, securitized
instruments.(E.g. Floating rates notes and Fixed
rates bonds) availed from non-resident lenders with
minimum average maturity years.

2. ECBs mean foreign currency loan raised by residents

from recognized lenders. Financial leases and Foreign
Currency Convertible Bonds are also covered by ECB
guidelines.
 Euro bonds::--
Definition of Euro Bond::--
A bond issued in a
currency other than the currency of the country
or market in which it is issued.

Eurobonds are attractive to investors as they have

small par values and high liquidity.
 Foreign Bonds::--
Definition::--Foreign bonds are the debt
instruments issued by foreign
corporation or foreign government.

Types::--
 Long Term Finance

Long term finance refer to those requirements

of funds which are for a period exceeding 5-10
years.
 Share

Securitization Debentures

Long
Venture
term New Debt
Capital
finance Instruments

Depository Retained
Schemes Earnings
 SHARES
A shares indicates a smaller unit into which the
overall requirement of a company is subdivided.

TYPES OF SHARES
THERE ARE TWO TYPES:
Equity shares
Preference shares
 DEBENTURES
It means a document containing
acknowledgement of indebtedness issued by a
company and giving an undertaking to repay
the debt at a specified date.
NEW DEBT INSTRUMENT
Zero interest bond (ZIB)
Deep discount bonds (DDB)
Junk bonds
Convertible debenture
 Retained Earnings
Retained earnings means that part of trading
profits which is not distributed in the form of
dividends but retained by directors for future
expansion of the company.
 Merits & Demerits Of Retained
Earnings
Merits :-
Ready Availability
Cheaper than External Equity
No Ownership Dilution
Positive Connotation
Demerits :-
Limited Finance
High Opportunity Cost
 Global/ American/ Indian
Depository Receipts
GDRs :-
A negotiable certificate held in the bank of one country
representing no. of shares traded on the exchange of
another country.
ADRs :-
It allows US investors to buy shares of ADS companies
without the cost of investing directly in Foreign Stock
Exchange.
IDRs :-
It allows foreign companies to raise the funds from
Indian markets.
 Venture Capital
The venture capital financing refers to
financing & funding of the small scale
enterprises, high technology & risky volumes.
 Securitization
Securitization is a process in which illiquid
assets are pooled into marketable securities
that can be sold to investors.

Advantages Disadvantages
Reduces assets liability Cost
mismatch
Locking in profits Size limitation
Liquidity Risk
 Some Important Sources Of Finance
Seed capital assistance.
Certificate of deposit.
Internal cash accrual
 Seed capital assistance

Designed by IDBI.
1% service charge for 5 years.
 Certificate of deposit

CD is a document of title similar to a time deposit

receipt issued by a bank expect that there is no
prescribe interest rate on such funds.

The main advantage of cd is the baker is not required

to encash the deposit before maturity period and the
investor is assured of liquidity because he can sell the
cd in secondary market.
 Internal cash Accruals

Existing profit making companies which

undertake an expansion programme may be
permitted to invest a part of their
accumulated reserves or cash profit for
creation of capital assets.
 Example Of Long Term & Short Term
Finance
Standard Chartered Bank Mahindra Finance

Equity capital = 58% Equity capital = 42%

Internal accrual (reserve & surplus) =14% Internal accrual (reserve & surplus) =12%

Debentures (bonds) = 20% Debentures (bonds) = 33%

Term (long term) = 8% Term (long & short term) = 13%

 Comparison Between both the
companies
More hold on the companies proceedings & Less hold as compare to SCB but have a
company is having high goodwill in the good hold and goodwill in the market.
market.
Company can skip dividends on equity shares Company can skip dividends on equity shares
more than Mahindra finance. but less as compared to SCB.

The company is having low tax deductible More debentures means more tax deductible
income. income.

Low debt contract means less restrictions on High debt contract can lead to impose
the company. restrictions.

Low percentage of term loans means High percentage of term loans means
company is having less dependence on the company is having high dependence on the
outside sources of finance. outside sources of finance.