Sources of Enterprise Finance: Private Institutions, Venture Capital, and Share Issues

Vocabulary flashcards reviewing private institutions, venture capital, and share issues, including their core definitions, advantages, and disadvantages.

Private institutions

Typically, a microfinance lender which aids people who do not have enough income to access traditional bank loans.

Microfinance organisations

Lenders that focus on helping entrepreneurs succeed and require borrowers to take a money management course as part of the loan agreement.

Advantages of private institutions

People with very little income can access small loans to get started as entrepreneurs, and borrowers receive training on managing their money.

Disadvantage of private institutions

Interest is paid on the loan, often at a much higher rate than the rate traditional banks charge.

Venture capital

An investment arrangement where an individual or small group weighs up the risks and rewards of investing in an enterprise and expects a share of the enterprise in return.

Advantage of venture capital

Most venture capitalists are experienced entrepreneurs with substantial knowledge and skills that can assist the enterprise.

Disadvantages of venture capital

Investors expect significant control over enterprise decision-making to safeguard their investment, which can create conflict with the enterprise founder.

Issue shares

Offering additional shares in the enterprise to existing shareholders or new people.