Business Finance Meaning and Definition
Business finance refers to external monetary assistance availed whenever a business runs short of capital. The funds enable individuals to maintain daily operations, expand market reach, procure raw materials, invest in infrastructure, and many similar necessities.
Different sources of business finance
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Financial Institutions
Financial institutions like Bajaj Finserv provide financing to companies in the form of Business Loans or business credit cards. Businesses applying for such loans must be at least 3 years old and the applicant must hold a credit score of 750 or more.
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Angel Investors and Venture Capitalists
Equity capital is another form of business financing. Two of the most common sources of such capital are angel investors and venture capitalists.
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Accounts Receivable or Invoice Financing
Businesses can receive financing by pledging their accounts receivable or invoices as collateral.
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Inventory Financing
Inventory financing is similar to the above where a company pledges its inventory as collateral.
There are various other sources of business finance like peer-to-peer lending, crowdfunding, etc. Avail such external financing opportunities when in need and do away with funding worries for your business.
FAQs
What do you mean by business finance?
Business finance refers to the external financial assistance a business may utilise to meet its monetary needs. The funds so availed can be used as capital investment to improve infrastructure, increase working capital, expand business operations, etc.
The funding needs of a business can be classified under the following categories –
- For fixed capital such as land & building, plant & machinery, etc.
- As working capital like raw material purchase, payment of wage, salaries, rent, etc.
- For upgrades to the latest technology and software.
- To diversify product range and upscale operations.
Enterprises can raise business finance from various sources to fulfil their funding needs. They can include loans from financial institutions, invoice financing, raising capital by offering market shares, crowdfunding, peer-to-peer lending, etc.
Loans and advances from financial institutions are available against minimum eligibility, making them among the more popular sources of business finance.
What are the types of finance in business?
Finance in business can be broadly categorised under two types –
- Debt finance
Better known as borrowed capital, debt finance is either a short term or a long term funding to be repaid along with interest to the lender.
- Equity finance
It is a type of finance raised in exchange for partial ownership of the business. Equity finance can either be capital introduced by the owner or by the investor/s. In case of the latter, the investors become shareholders of the company.
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