Business finance is often confused with business credit or venture
Business finance is often confused with business credit or venture capital. Business finance is actually a much larger term for things about the management, development, and funding of financial resources. It involves all areas of the business enterprise: sales, purchases, financing, marketing, and so on. A company’s success depends on all of these areas being in good condition, with efficient operations, and able to meet their customer’s needs. As such, business finance is closely related to banking, as both are concerned with managing and controlling financial resources.
In a nutshell, business finance refers to the use of cash resources to take advantage of opportunities that may not immediately present themselves, but that may in the future. This includes the use of debt funds, equity financing, and the various types of business loans that can be structured. While venture capital is almost always used as a last resort, it can help to provide the necessary funding to a company in certain circumstances. The purpose of venture capital is usually to fund start-up activities or to acquire and manage small businesses that have the potential for growth, but that are not highly lucrative.
Venture capital is actually just what it sounds like: money from investors that is raised primarily for the purpose of buying equity in a business. In some cases, the debt financing is provided by lenders to companies that have significant long-term assets, while other times the debt financing is provided by private, individual investors. Private individuals usually provide debt financing for purposes such as expanding a business into multiple locations, which is known as franchising, or for acquisition of smaller, cheaper businesses. There are also other reasons for obtaining debt financing, including obtaining needed funds to meet governmental obligations, or to eliminate personal debts. These reasons typically require an even longer time period to deliver the desired results, however.