Financing is a manner in which a person provides funds to the other person. Basically, it is a system of borrowing funds from one person or an organization by another person who requires it.
We all know that every business needs money to start with or needs finance. Do you think that everyone is fluent with that benefit of money while starting their business or service. The answer here is no. Not everyone is born with a golden spoon in their mouth who has all the money to live his life, to start a new business or service or anything else. A person can be in need of money or funds for anything in his life whether for the sake of treatment, education, business or any other necessity of life.
Finance have broadly divided into two basic categories:-
- Equity Financing: It is a type of funding which is being provided in exchange of partial ownership and future profits.
- Debt Financing: It is general financing where money is given with the motto that principal amount will be repaid with the interest charged on that amount.
Financing in Business:-
Financing is very important in business as it is the way when people are out of funds they can borrow the same for the smooth running of business as it allows the person to buy assets, machinery and other important things for the business.
Categories of Finance:-
Finance is further classified into three broad categories which are as follows:-
- Public Finance: It deals with the finance and issues related to finance with the central government. In this the various departments initiate the funds through the public by various funded schemes and programmes for the public.
- Corporate Finance: It deals with initiating or raising of the funds or money for the company through proper budgeting, raising capital and so on. Capital finance can be divided into three main areas : capital budgeting, capital structure and working capital management.
- Personal Finance: It is the finance which is being used by every individual person or household mostly. It is a type of finance which includes all things like budgeting, insurance, mortgage, savings plan, retirement plan and all.
Now, Before moving ahead in my blog I would like to request all my readers here to please do write a blog to us just like we did on the topic Financing write for us Sharing your views and opinions with respect to financing with us.
Importance of Financing:-
Financing brings up lot of importance to us that are as follows:-
- It helps in smooth business transactions.
- It helps in a smooth individual life.
- It encourages both savings and investment.
- It helps in increasing the overall GDP of the country.
- It helps in generating good profits.
- It helps in operation enabling.
- It helps in expansion of business.
- It helps in sustaining the business in miserable conditions.
- It helps in dealing with problems when a business is suffering crunches.
- It helps in succeeding long term goals.