Funding

Funding is the act of providing financial resources, usually in the form of money, or other values such as effort or time, to finance a need, program, and project, usually by an organization or government. Generally, this word is used when a firm uses its internal reserves to satisfy its necessity for cash, while the term financing is used when the firm acquires capital from external sources.

Sources of Funding

Funding can be divided into two main categories: internal funding and external funding.

Internal Funding

Internal funding is the capital derived from the savings of the company and its profits. The main advantage of internal funding is that a firm is able to maintain control since there is no dilution of ownership or control, which can often accompany external funding.

External Funding

External funding is the capital derived outside the company, from investors or banks. External funding includes venture capital, credit from financial institutions, and equity funding from investors.

Types of Funding

There are several types of funding including bootstrapping, crowdfunding, donations, grants, savings, subsidies, and taxes. Each type of funding has its own set of characteristics and is suitable for different types of businesses or projects.

Funding in Different Sectors

Different sectors of the economy rely on different types of funding. For example, in the healthcare sector, funding is often obtained through insurance payments, government subsidies, and out-of-pocket payments by patients. In the education sector, funding can come from government sources, tuition fees, and donations.

See Also

• Investment
• Finance
• Capital (economics)
• Funding round

References

Funding Resources
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