Table of ContentsIntroductionA Model of Entrepreneurial FinanceEntrepreneurial Finance in KenyaDebt and EquityDebt FinancingAdvantages of DebtDisadvantages of DebtEquityAdvantages of EquityDisadvantages of EquityConclusionIntroductionEntrepreneurs think about and start their business with the primary aim of make it prosperous and progressive. However, one of the determining factors for the success of every business is entrepreneurial financing, which integrates several factors and aspects. In business studies, "entrepreneurial finance" refers to the application and adaptation of various financial techniques and tools to the operations, financing, evaluation, and planning of an entrepreneurial venture. Therefore, entrepreneurial finance can be simplified as the finances and financial practices involved in running a private business. Similarly, the study of entrepreneurial finance can be compared to corporate finance, which focuses on essential principles such as risk analysis, financial objectives aimed at increasing the value of the company, assets , liabilities, confidentiality, negotiation and overall business management. In other words, entrepreneurial finance is a broad subject that can be imparted in depth through debt and equity. However, using typical examples, this article provides an in-depth argument to explore how debt and equity can be used to finance entrepreneurship. Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”?Get an original essayA model of entrepreneurial financingFollowing the growing demand for financing in the corporate world, most economies around the world have come up with several options and methods not only build capital in the business, but also maximize existing capital. More importantly, managing economies of scale is one of the most popular methods for increasing business performance and generating more capital. Nevertheless, some argue that business growth is directly proportional to entrepreneurial financing. This means that the higher the funding, the faster the business growth. Therefore, each capitalist has different development goals that can be achieved at different stages of the business life cycle. The path to a successful business is complicated mainly due to risks and other complexities. For example, most capitalists are motivated by lifestyle factors, which lead to external financing. Others face significant crises as they ignore the present factor to focus on future growth plans that require significant funding. Each of these stages has different funding sources and needs. For example, it is essential to emphasize that most businesses and entrepreneurs go through the same cycle when it comes to entrepreneurial financing. First, the entrepreneur injects his savings, as well as family/friends' assets, to finance or manage the business during the development stages. Second, future funding will come from angel investors and potentially venture capitalists. Additionally, the third funding is usually the largest and comes from large bank loans and venture capital firms since the business is now large. Fraser, Bhaumik, and Wright (2015) argued that many economies experienced a declinesignificant amount of debt and equity. financial flows to SMEs. Therefore, some fear that the associated financing gap could limit business growth and, therefore, hamper economic recovery. They demonstrated that both developed and developing economies suffered from these challenges, but the UK, in particular, showed major structural problems in the markets for alternative sources of finance such as entrepreneurial capital and traditional bank credit. In addition, the UK government established a UK merchant bank, modeled on the German state-owned bank Kreditanstalt für Weideraufbau (KfW), to help improve flows of debt and equity finance to SMEs. Likewise, this similar approach has been tested and used here in Kenya through various financial products or, for example, the issue of financing gaps in the country, in terms of debt and equity provision, has been a constraint persistent impact on small business development. Entrepreneurial Finance in KenyaSmall businesses and new businesses have become an increasingly important part of Kenya's economic development. The Kenyan government, through the Ministry of Finance and Small and Medium Enterprises, collaborated and identified these gaps in the provision of small-scale equity investments from which unique financial products such as the Uwezo Fund, the Youth Funds and others were introduced. Although these products have faced major complications, notable progress has been made in boosting entrepreneurial financing across the country (Cumming, 2012). Microfinance financial institutions (MFIs) which have existed for over three decades are another main source of venture capital in Kenya. Prominent MFIs include the Kenya Women Finance Trust (KWFT), which has played an important role in empowering women and businesses. However, recent studies have confirmed that although various tools and players have been present in the markets for some time, starting and running a business in Kenya remains a major challenge for many people. According to a study by FSD Kenya (2016), many Kenyan entrepreneurs and investors experience almost similar financial problems in their businesses. In a number of cases, banks have played an important role in enabling entrepreneurs to succeed in business (FSD Kenya, 2016). Nonetheless, many of those interviewed by FSD have experienced times during their development journey where banks have been unable to provide them with the necessary financing, forcing them to look elsewhere for funds and support. Entrepreneurs believed that banks needed to make changes to improve financing for SMEs. These suggestions are summarized, along with additional recommendations explored by the researchers and derived from the study. It is for this reason that economists and business analysts have been looking for alternative financing options that are simple, convenient, reliable and secure. The three main alternative financing options available to most Kenyan startups include Bitcoin-based small business loans, Africa-focused crowdfunding, and peer-to-peer microfinance loans. It is essential to mention that some of these products are very new on the market and therefore require more in-depth conceptual and practical studies to prove their reliability and conditions of use. Although start-ups and venture capital financing are often linked in the public eye, bank loans area more common source of financing for many entrepreneurial businesses. The two sources share certain common characteristics. Because entrepreneurial businesses are typically small and have a high risk of failure, venture capital and bank loans require careful monitoring of borrowers. Both types of financing use restrictive covenants to restrict borrower behavior and provide additional levers of control in the event of poor business performance. These covenants often limit the company's ability to seek financing elsewhere, which relates to another common feature: the use of capital rationing through installment financing and credit limits as a means of controlling ability of borrowers to continue and develop their activity. Despite these similarities, there are significant differences between these two types of financing. While banks lend to a wide variety of companies, companies that finance through venture capital tend to have highly skewed return distributions, with a high probability of low or even negative returns and a low probability of extremely students. Debt and EquityDebt is less risky than equity. , and thus the institution's assets are less affected by its private corporate information, reducing adverse selection problems when the institution itself needs additional funding. Since these costs are passed on to the entrepreneur in his financing costs, he shares this preference for debt, if not equal. This simple picture is complicated by the fact that even if it is optimal to keep the entrepreneur's business in operation, other choices may be necessary. One of the most critical issues facing entrepreneurial firms is their ability to access capital (Denis, 2004). Since these businesses are generally not yet profitable and lack tangible assets, debt financing is generally not an option. Therefore, entrepreneurs tend to rely on three main sources of external equity financing: venture capital funds, angel investors, and corporate investors. Venture capital funds refer to limited partnerships in which the managing partners invest on behalf of the limited partners. Companies invest on behalf of their shareholders, for financial and strategic reasons. The existence of multiple sources of financing raises the question of whether the source of financing is important to the entrepreneurial venture. This question is analogous to similar questions addressed in the corporate finance literature. For example, extensive research is devoted to studying the importance of debt financing source. This literature generally concludes that banks are "special" in that they provide services such as monitoring that are not provided by other creditors, while non-bank private debt plays a critical role in meeting financing needs. companies with low credit quality. . Therefore, debt to equity ratio is a major factor in entrepreneurial finance since it involves financing decisions. The existence of theory-based asymmetric information is used to understand market failures and examine the growing demand for financing. Overall, obtaining debt and equity follows complex processes that raise additional considerations in investment decisions...