Business finance is a broad term encompassing various things regarding the development, management, and allocation of funds and investments for business activities. The term was first used in economics to describe the field of business administration, but today it has expanded to include all aspects of small businesses from manufacturing companies, to janitorial services, to franchises, and to financial organizations. Business finance is the study and management of financial resources in businesses in order to maximize the return on investment from their usage. The discipline must deal with a multitude of issues such as obtaining finance for start-up ventures, managing the flow of funds between operations and financing purchases, investments, and repurchases.
The study of business finance must involve both quantitative as well as qualitative analysis. A wide variety of mathematical methods is applied in order to facilitate financial planning, such as the Functional Analysis, Financial Measurement, and Business Finance Analysis. In addition, a detailed knowledge of business cycles and their characteristics is crucial. This includes information such as market cycles, business cycle theories, investment objectives, business development strategies, and potential problems that may arise, as well as potential solutions and cost effective solutions.
Other areas of focus in business finance are risk and capital budgeting, working capital management, acquisitions and mergers, venture capital, private equity, owner financing, ownership development, and projects. A wide variety of business owners choose to fund their own businesses through loans or lines of credit, with preferred creditors acting as co-borrower and lenders providing either a loan or line of credit to the venture capital. Venture capital funds generally come from wealthy individual investors. In addition, venture capitalists may also fund development finance, which includes the process of bringing a new facility into operation, or may act as financial sponsors for start-ups.