Finance: The Most Essential Factor Of Your Business

Why Business Finance Is Important?

The importance and necessity of business finance cannot be stressed in a sufficient way rather can expressed in terms of helping the entrepreneur to plan for purchasing land, assets and other sort of fundamental things which are needed in a business. A business cannot thing or run without considering business finance because each and every element related to any business comes up with financial statement such as in terms of buying raw materials a business needs financial stability.

In addition to that in order to reach to potential target audience with the help of marketing required to have a good financial statement. Along with that labour cost and many other costs required to be managed by financial resources. Not only about physical assets but with the financial stability an organization can think about up-gradation technology and usable software in order to stay up-grade and ahead in terms of competition.

Based on proper machinery and other sort of consideration a business can ensure about high quality standard in the industrial background. Additionally, keeping a certain budget an organization can also deal with contingencies without any disruption of operation within the business.

What Are the Types of Finance?

There are different sorts of finance a business can take into consideration and those types are going to discuss in the following research:

• Debt Finance: This is such type of finance where an organization needs to acquire cash in order to run or maintain a business in a proper way. This sort of finance does not provide the ownership to the lender of the money; instead the lender must repay the principle amount along with the interest rate. This debt finance can be off different types according to the needs of the business such as medium term, short and long term.
• Equity Finance: This is another way of raising money or capital to run or maintain the business by offering some shares of the organization. This is that kind of funding or finance types which applied by start-up and for some kinds of new businesses. The famous and well known organization applies this financing to raise capital for the expansion of the business.
• Corporate Finance: This is other types of financing which includes financial activities to run an organization. It is considered as a division or department which oversees the financial activities within a business. This main concern of this financing is to maximize the values of the shareholders through long and short term planning and the implementation of different strategies.

What are the Sources of Business Finance for an Entrepreneur?

There are different sources for business finance for a business that an entrepreneur needs to be taken into consideration and those sources are going to be discussed as follows:

A. Personal Investment:

This is very basic and common sort of financing used by every entrepreneur where based on their personal budget and financing an individual needs to come up with certain plan where a small business can setup. Based on the success of the business that entrepreneur can have more financial stability.

B. Bank Loan:

This is another sort of sources of finance where depending on the bank loan an individual can start their business. If the business is in high level then the loan also needs to be approved with high amount and interest rate will also be high. Considering this an entrepreneur needs to take the loan so that the business can be capable enough to repay the capital as well as the interest rate.

C. Business Angels: 

Like different banks, there are different investors in the business environment invest to a party based on the wealth and development initiatives of the business. These business angels are also dependent on the profit and revenue of the business so that they can have a high commission from the business.

Objectives of Financial Management:

Different objectives related to financial management as follows:

1. The first and foremost objective is maximizing profit because without having a proper plan and management on financial consideration a business cannot have proper generation of revenue. Reducing the cost of labour and raw materials can increase the profit as well.

2. In addition to that with proper financial management an entrepreneur can tracking cash flow and liquidity to make sure that the business is having enough money on hand to meet the obligations.

3. Along with that another objectives of financial management is to develop the scenarios of developing financial statement based on the current state of the business and also forecast that assume a broad range of outcomes depending on the market conditions.

4. Another most important consideration is the compliance with federal, state and industry related regulations and consideration that a business needs to ensure the compliances. In addition to that dealing with the broad of directors and investors is another compliance that an entrepreneur needs to take into consideration.

5. Financial management can also help in increasing the efficiency of the business in every part of the business. Proper distribution of financial stability in each and every department can also increase the efficiency to the entire organization.

Scope of Financial Management

In the management of financial consideration there are certain scopes a business can take into account and those scopes are going to state as follows:

a. Investment Decision:

One of the major roles of finance in business is to manage all the activities in a proper way. Therefore proper decision on investment is necessary to ensure about generating profit and revenue from the business activities. The decisions of investment can be short and long term both where based on the demand and needs of the business investment decision needs to be taken into account.

b. Financing Decision:

This is another scope of financial management indicates different possible sources of raising funds for business. A proper decisions on financial planning is necessary and important to make sure about the availability of funds whenever the business needs to work on different activities.