Lueara is a brand under Natural Pink Cosmetic Ltd., an Indian startup for production of beauty items including lipstick, makeup kits, bridle makeup essentials etc. The Company was incorporated on 12th September, 2022. Th

CS Executive · Setting up of Business Entities and Closure · PYQS · December 2024
Lueara is a brand under Natural Pink Cosmetic Ltd., an Indian startup for production of beauty items including lipstick, makeup kits, bridle makeup essentials etc. The Company was incorporated on 12th September, 2022. There is huge demand of the brand in India, as well as, in International Market. For expansion of the business various methods of the financing are being considered, including Equity Financing and Debt Financing. Highlight the difference between the both of financing options.

Answer & Explanation:

Analysis of the different Financing options are as under: Characteristics Equity Financing Debt Financing Nature There is no component of repayment of the invested funds. Invested Funds to be repaid within a stipulated time frame with interest. Risk Risk factor for the investor is higher as he has no guarantee against his investment Risk Factor for the investor is lower as he generally has collateral against his investment Pressure for Repayment Less pressure for startups to adhere to a repayment timeline but added pressure from investors to achieve growth targets More pressure for startups to adhere to repayment timeline and as a result more pressure to generate cash flows to meet interest repayments Return to Investor Capital growth for investors Interest payments Involvement in Decisions Equity Fund Investors usually prefer to involve themselves in decision making process Debt fund have very less involvement in decision making Sources Angel Investors, Self-financing, Family and friends, Venture Capitalists, Crowd Funding, Incubators/ Accelerators Banks, Non-Banking Financial Institutions, Government Loan Schemes (CGTMSE, Mudra Loan, Standup India)

Topics: Business Finance

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