Final answer:
Start-up firms most commonly secure financial capital through investments from angel investors and venture capital firms, as these provide funds in exchange for equity and take on greater risks compared to traditional financing like bank loans or bonds.
Step-by-step explanation:
The most common ways for start-up firms to raise financial capital are through private investments by angel investors and venture capital firms. Start-ups often lack the profitability and track records that would allow them to use their own profits or secure traditional bank loans. As these firms are in early stages, they may not have profits to reinvest, and banks generally prefer lending to established firms with proven financial history. Venture capitalists and angel investors provide critical funding in exchange for equity or partial ownership, bearing higher risks for the potential of substantial returns if the start-up succeeds.
Banks are more willing to lend to well-established firms because they can demonstrate the ability to repay loans through their financial history, creditworthiness, and profitability. Conversely, a bond is a fixed income instrument representing a loan made by an investor to a borrower (typically a corporate or government entity), which means the firm has a legal obligation to repay the debt with interest at fixed intervals.