Business finance refers to the various ways of financing a business. There are a number of answers to the question how to finance a business. Business and finance are interrelated and they cannot function without each other’s co-operation. Currently, business finance has the most significant role in the global business scenario, which involves a fierce competition.
In order to become successful in business, the business enterprises have to rely upon a number of factors. One of the factors is a sound business plan or strategy and on the other hand, finance functions as the mainstay or anchor of any commercial institution. In order to achieve success, a business enterprise should have a sound financial backup.
Finance plays a pivotal role in the day-to-day operations of a business enterprise. For running a business or starting a new business, a business finance loan is the most suitable option to satisfy the needs of the entrepreneur.
Purposes served by business finance loan are as follows:
- For buying plant and machinery
- For buying offices and premises
- To meet the necessity of working capital
- For payment of different types of business expenditures
The different types of business finance loans can be categorized into the following:
- Venture Capital
- Invoice Factoring and Invoice Discounting
- Soft Loans and Grants
- Hire Purchase and Leasing
- Bank Overdraft
- Mezzanine Debt
A business finance loan is configured in such a manner so that it meets a wide variety of commercial purposes. The principal advantage of a business finance loan is that the repayment periods of these types of loans are flexible. The profit earned from business is not at all static in nature and it changes frequently, so it is convenient for the borrowers for managing the repayment terms.
For getting a business finance loan approved, the entrepreneurs have to disclose their credit history, business records, as well as the profit and loss statements. In case the business entrepreneur has a bad credit history, then he has to convince the lender.
Last Updated on : 1st August 2013