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A Source of Low Interest Business Finance is Something That All Entrepreneurs Look For

Updated on July 23, 2012

Every business needs some means to finance its setting up and some form of working capital to run the business till the profits start coming in. The soundness of a business and its strength is quite often, very much linked to finance availability and the efficiency with which such finance is used. Business finance increases the viability of a business, its resistance to losses and poor economic conditions. It is quite often likened to a lubricant which allows the wheels of business to move more smoothly if properly applied.

Applying Business Finance

Business finance requirements start with the initial stage of starting the business. It is as important for companies, non-profit organizations, and immaterial whether you are a home start up or an international multinational. One of the first avenues where business finance is applied is the purchase of assets in the form of property, leases, machinery, office equipments, information technology setups, and other things needed for the business to function. One may even require such finance to pay for professional services that can help to set up the business. Some finance is initially needed also for advertisement and promotion needed to launch the business and attract customers. Business finance also has to form a part of the funds needed to develop products or services, contingencies for losses, staff recruitment and training and investments in stock and materials.

Sources of Business Finance

There are many sources for business finance and these can be broadly classified as those that are needed for the short term, the medium term for developing and establishing the business, and finally long term finance which has to contend with future modernization or expansion plans. Short term finance has more to do with actual day to day running of the business and can include things like bank overdrafts, purchases of materials in installments, bill discounting, credit facilities and other such needs. Such financing can be arranged through a lot of agencies, financial lending institutions and banks. They will normally need the business to present a properly executed method of running the business and dedicated customers. Medium term financing is more for modernization of plant, introduction of newer technologies and other aspects that can lead to re-engineering the business organization. It is when you move into the stage of expansion and growth of a business that is already well established that one needs to consider long term finance. This can come from selling equity in the business to the public, retaining earnings from profitable years or even considering leasing new acquisitions.

A well run business will always attract financiers and other sources of money looking to make investments in sound and profitable businesses. That is the reason that new start ups find it much more difficult to attract business finance, because they are considered risky due to lack of credibility.


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