Business Financing: An Essential Component Of Business

Studies show that the wealthiest men and women in the world have something in common: they are all businessmen

. They have a wide range of business ownerships, stock shares, and brokerages in different fields. They also have key management positions in large multi-national companies. Education does not fully identify wealth, because wealth is built on good business financing decisions.

Business financing refers to the financial management of a company. Finances are composed of budget, investment, and stock shares. Oftentimes, business financing tasks are carried out by accountants, auditors, and managers. There are different categories of business financing. They are distinguished based on the size of a company. These are small-scale, medium-scale, and large-scale financing. Technically, large-scale financing is more tedious than small-scale financial management.

Business financing is an essential component of business. Appropriate allocation of budget is necessary in carrying out business operations. These include project execution, product launching, business expansion, and restructuration. Budget allocation is one of the most important roles of financiers. They request for budget proposals from department heads and team leaders. They approve proposals based on project need and duration; bigger projects basically require bigger budget.

Moreover, business financing is vital in managing investments and credit accounts. There are companies whose capital come from business loans and cash advances. Financiers need to monitor income flow and sales invoice for loan payment. Some loans require collateral from debtors. Financiers need to ensure a companys financial stability to avoid collateral loss. In some cases, companies become bankrupt because of unpaid loans and ballooning loan interest rates.

Companies have long-term and short-term goals. Financiers need to assess their financial capacity to achieve all goals. They must always have a contingency plan. In business financing, contingency plans enable companies to cope with ups and down of business. However, they can only outline contingency plans with appropriate budget. For instance, manufacturers stock raw materials for future needs. This is a contingency plan for business shortage problems. They can only purchase additional raw materials with a suitable budget.

Skilled financiers are necessary for successful business financing. The efficiency of business financing depends on the responsiveness and efficiency of financiers. They must know various modes, techniques, and methods in solving business finance setbacks.

by: John Lair

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