Financing is the backbone of business enterprises. The success of a business depends on the judicious use of men, material machinery, and managers. But none of the mentioned 4'Ms'can work efficiently without the input of the fifth and the last' which is'Money' .This is where 'business financing'steps in. Businesses face liquidity problems for operational costs and very often have to depend on loans to tide them over such periods.

Need for Business Finance:

Before raising funds it is important to gauge the type of funding or financing you need. Is it for starting the business, or for incurring running costs, is it to acquire new ventures or to buy assets. The reason for the finance should be evaluated against how much risk this entails for the business. Staying on top of the cash flows and accounting for it in a transparent way is an important function of business financing. The funding that the organization acquires should sail it through troubled waters instead of fanning the storm to make it choppier.

Business finance may be required for

To Purchase fixed assets

To meet contingencies

To hire services of human resources

To fill the gap related to the time between production and recovery sales

To adopt modern technology

To fund business growth

To meet day-to-day expenses

Business financing may be obtained by an organization in the following ways:

Equity

Here the organization sells its shares of the business in order to raise money. The shareholders then become the partial owners of the company. The ownership is limited to the value of the shares that they hold.

Debt

This is when the organization borrows money and pays interest on it for the period of the borrowing and then pays back the Principal to the lender.

Private Equity

Here a professional team of legal advisors, consultants and financers provide the finance for some interest and ownership in the company management.

Angel investors:

These are specialized firms, or individual investors that provide finance to new businesses. Financing from this source can be obtained by reaching out to the Angel investors through financial consultants etc.s

Friends and Relatives

Many businesses depend on this informal method of financing their business needs. Borrowing from friends and relatives should also be done in a structured manner with proper documentation in order to avoid any rift in relations later. s