“Finance” is a broad term that covers many factors. David Johnson Cane Bay Partners specializes in a segment known as fintech consulting, helping clients navigate for the future. Borrowing loans, investing, budgeting and forecasting are just a few other elements of finance. Generally speaking, when a person is managing money and assets, he or she is practicing the art of finance.
Businesses especially need to control their money wisely, since their capital is what they thrive on. This article will discuss some of the ways finance helps businesses succeed.
One of the best ways for a business to manage its assets is through equity finance. As long as cash flow is impressive enough, there may be investors who would like a share of the company. A business owner or financial manager can put shares up for sale and then raise capital. This financing method is popular among new companies such as startups, but it is also used by established companies who are looking to expand their territory.
Debt finance is another way a business can get the right funding for its operations. Unlike equity finance, debt finance does not give the lender ownership of assets. Instead, payment installations are set up where the borrower can secure the loan, as well as the set interest rate. Rates usually depend on the duration of the loan, the principal amount, inflation and the business’s plans for the loan. When a business just needs some funding here and there, it can get short-term loans through credit cards, trade credit, overdraft, bill discounting and other means. For equipment and fixed assets, businesses often go for medium-term loans that can last a little longer. For large investments such as commercial real estate, long-term loans are usually the best option.
Some loans come with high-interest rates and short durations that can be intimidating for business owners. In some cases, the lender also won’t accept collateral such as letters of credit or cash. This is where private finance can be helpful. Loans from private entities are not as tightly regulated and provide more leeway to lenders and borrowers alike. A company often has access to more capital than it would have with public financing. Finding more investors is usually easier for private companies, and administrative costs tend to be cheaper.
When businesses become larger, corporate financing is a great way to improve shareholder value. Different factors such as taxes, investments, bonds and accounting can be compartmentalized and handled by specialists. With this form of financing, an in-house department is usually set up to handle financial operations. With the help of advisors, bookkeepers and analysts, a company can develop clear-cut strategies for its daily activities and long-term goals.
When businesses handle their money with care, they can maximize their return on investment and increase their shareholder value. Finance is continuing to evolve, especially with the dawn of fintech and digital services. With all the advancements that are being made, there’s no telling how much flexibility businesses will have in the future.