All you need to know about business finance

For a business to succeed, having a sound financial plan is considered to be of utmost importance. Strong finances have the capacity of serving as a foundation for business administration, Moreover, finances can also help in expanding a business’s operational capabilities. Hence, it is both necessary and unavoidable to have an in-depth understanding of Business Finance and how it works. Below, you learn the meaning of Business Finance, the definition of financial management, and even the several facets that are associated with Business Finance.

What is Business Finance?

The word Business Finance can be defined as the availability of credit to a company. The financial status of a business is considered the most essential asset. Finance is regarded to be crucial for things such as the production of commodities, obtaining raw materials, acquisition of support, and the continuation of day-to-day operations.

For understanding what Business Finance is, it is necessary to learn about the importance of Business Finance. Activities such as the procurement and management of capital funds for the purpose of achieving a company’s financial objectives and needs fall under Business Finance.

Business Finance also refers to the funds which are availed by business owners for the purpose of meeting their needs. These can include ensuring that the business continues to operate, arranging for top-up funds for financing business operations, procuring finance for the purpose of purchasing capital assets for the business or even overcoming a sudden shortage of cash faced by the business.

What is the importance of Business Finance?
 

Listed below are the reasons why Business Finance is very important if a company is serious about being successful:

· Business Finance can help with things like property finance, i.e., purchasing land as well as acquiring capital and other types of assets without much difficulty. Long-term finance offered by loan providers can help you with the upkeep of the day-to-day operations of your business.

· With the help of working capital, a business can effectively their systems with the latest software, purchase machinery and land, and so on. With the help of Business Finance, it is possible for you to ensure that the operation of your business is of the highest standard.

What are the different types of Business Finance?
 

There are two types of Business Finance. They are:

· Equity finance:
 

Under equity finance, one is considered the owner of a firm based on the extent of their investment. This type of finance might consist of finance that is brought into the business either by the owners or shareholders. Usually, an investor allocates a certain sum of money at their disposal towards the business in lieu of owning a share in the business. As profits are generated, an investor earns income based on the number of shares they are owning.

· Debt finance:

Debt financing refers to companies leveraging any of their fixed or other assets with an aim to raise capital. The company that raises funds in this manner is supposed to repay the loan amount over a certain period of time. Some of the examples under this method include asset financing, bank loans, line of credit, and trade finance.

What are the different benefits associated with Business Finance?

Here are some of the advantages that are associated with Business Finance:

·  Business Finance can help in ensuring wealth and profit maximisation

One of the foremost advantages of Business Finance is that it can help in maximising your wealth in case you are a shareholder. Generally, wealth maximisation is considered holistic. This type of maximisation is known for ensuring the organisation’s growth. Profit maximisation can be described as the management of financial resources for the purpose of increasing the profits of the company.

· It ensures that capital is available during times of emergency

If your business is to function in the long term, it is imperative that your company is in an optimum financial condition. With the help of Business Finance, you ensure that funds are readily available at your disposal so that they can be used at a time when they are needed.

If you are looking for a business loan, do note that IDFC FIRST Bank offers collateral-free funding of up to ₹1 crore for self-employed individuals as well as businesses. You can get quick funding of up to ₹50 lacs, depending on your current account statement.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.