Business finance is a broad term encompassing concepts related to the study, development, management, production, and allocation of funds. It is the branch of accounting used to provide an introduction to financial management. The concepts that it encompasses are investment banking, corporate lending, merchant banking, private lending, public lending, and venture capital. It also includes insurance, merchandising, complex derivatives, venture capitals, technology transfer, and internal business transactions. While a degree in business administration may be required for a candidate to seek employment in finance positions, several programs at colleges and universities have been developed to give a thorough grounding in the subject and prepare one with the skills to become proficient in managing finances.
There are a number of different types of business financing options, depending upon the nature of the company and the financial needs. Commercial banks handle daily bank loans and provide loans for large businesses, and they issue promissory notes, which are repayment plans for a borrower’s principal and interest due during a specific period of time. Hedge funds are organizations that invest in different types of assets to generate returns based upon the performance of the underlying market. Venture capital companies provide start-up capital for early-stage companies that can prove promising. Private lending provides smaller amounts of capital for specific purposes, such as obtaining inventory or expanding into new areas.
In order to capitalize on the various forms of capital available, business owners will need to apply for loans and use the funds to further their business interests. In the past, venture capital and bank loans were the only available forms of business financing, but with the current changes in the Small Business Administration’s development finance programs, there are now several ways to obtain cash. Lenders offering non-recourse financing and debt financing are two common options. Recourse capital, which is based upon future capital payments, is not available to all lenders; however, since it requires no initial payment, many enterprising businesspeople are able to obtain this type of capital.