People require money to purchase goods, equipment and raw materials for establishing their business enterprise. There are two options; you may need your business capital in savings or coming from an investor. Business finance is also known as Corporate Finance in the modern business world.
Let me break down the complex concept of Business Finance. It is a process dealing with raising, allocating, and managing funds by business enterprises in a logical manner. If you look at complete concept of financing, it is the process of providing the money for business activities, Like Investing, Purchasing the equipment, taking care of shareholders and others.
Financial Institutions like banks offer the money to investors, business owners, entrepreneurs and consumers to achieve their goals. For the business to succeed, finding the correct funding source is vital. If you take money from the wrong source, you will lose part of the money or find yourself in a repayment mode, affecting your growth for many years to come.
Business finance has many sources and some of the chief sources of the business finance are given below as under:
Retailers: They purchase the goods for your business enterprises, through store credits. Let me explain the store credits, where in you make purchases on the card, and make the payment within the agreed time frame. Some retailers offer interest free period on store credits.
Suppliers: They know the business owner very well because of the personal networks and will have a strong bond. Furthermore, they will supply the goods and offer concessions in payments depending upon the financial situation of the owners. Furthermore, they will also offer good offers for you. In other words, they will allow you to delay the payment for the products and services taken.
Family and Friends: These are the people; you meet day in and day out in the streets, pubs, parks, theatres, malls and other places. They may or may not give financial assistance, depending on their situation at that moment when you ask the money. However, they can be counted upon in giving your assistance. Money taken from friends or family members (or insiders) comes under this section. You can return the amount, when your financial situation improves, and in some situations, they may waive off the loans given to you as a gesture of goodwill.
Financial Institutions: It is an establishment comprising the Banks, Building Societies, Finance Companies and Credit Unions that help in setting up the business enterprise. The Finance assistance can be provided using Line of Credit, Loans, and Overdraft facilities. They ask for your documents like the Property Documents, Source of Income, Check Your Financial Ability, Repaying Capacity and others. This comes with lot of conditions, where in one need to pay on or before the due date to avoid interest charges.
Debt Finance: You can consider this as the money borrowed from banks and financial institutions by a company to be paid back at a future date with certain rate of interest. You must pay the loan within the stipulated time to avoid the interest rates. The payment will be made monthly, half yearly or towards the end of the year, depending upon the financial ability of the owner of the establishment.
After the loan is approved, the repayment of the loans starts and interest on the loans is deductible. This applies to short term or long-term loans and offered against any property, like the owner’s property or business assets by various banks like Axis, SBI, ICICI, Canara Bank and others.
Let me put this with an example, if a company requires a loan of 11 Crores, it can raise the capital by selling the Bonds or the Shares to the investors and carry out the daily business of the company.
Business will need to understand and analyse their financial activities for various reasons, like surviving in bad times and recovering well to do good in the future. How you manage the resources, will decide on your ability to Purchase Goods, Obtain the Licenses, Employing the Staff, Increased quality and productivity, Welfare of the employees and Expand the Resources in a logical manner. It is essential to have great vision and a great product for the company, however the notion of Business Finance and its impact cannot be ignored.
The business finance is good in making things happen like:
Remember, when you spend money, it can either be an expense or turns into assets. You must have sufficient money for any challenges so that the business enterprise creates jobs and generate the profits.
Generate Accurate and globally accepted project report for financing