Finance & Investment

Understanding the Nature of Business Finance

Business finance is a broad term that encompasses various concepts and issues concerning the study, creation, management, investment, and disposal of loans and other financial resources. It is also commonly referred to as business banking, although it is not always banks doing the lending. The current business finance industry is much more diverse than any other financial field in developed society. Although historically the field has been dominated by banks, venture capitalists, and mortgage brokers, with recent consolidation of some of these roles by nontraditional banking institutions, there has been a growing move away from banking towards nonbank sources for business finance. Indeed, nontraditional lenders are rapidly gaining market share in the business-to-business financing market.

Reza Satchu

Business finance is an integral part of the corporate finance management function. This function is the primary method for creating and monitoring long-term and short-term financial plans and strategies. A company’s business finance functions include the research and analysis of potential funding sources for start-up ventures, acquisitions, mergers, and divestitures; the allocation of resources for operational expenses, working capital management, and investment management; the development of financial forecasts and programs for company growth; and the preparation and revision of financial statements necessary for the company’s shareholders to evaluate the company’s balance sheet. The ultimate objective of business finance management is to make sure that the goals and requirements of the parent company are appropriately achieved. Businesses depend upon business finance professionals to help them effectively achieve their goals and objectives.

In order to assist business enterprises with their day-to-day financial activities, a wide range of finance professionals are available to provide a range of financial consultation services. A good example of a service provider is an attorney or certified public accountant. These professionals can help business enterprises with a variety of financial statements and analysis, including: cash flow analysis, balance sheet analysis, and business development and strategy analysis.