Business finance is a broad term encompassing things regarding the development, management, accumulation, and utilization of financial resources. This includes the financing of business ventures, including purchasing equipment, land, and labor, and the repaying of loans and other financial obligations. Finance can also include financial concerns such as purchasing business assets such as real estate, goodwill items, and patents; the repaying of debts of individuals and organizations, and the raising of capital for business purposes. The concepts and principles governing business finance are largely derived from the laws that regulate the transfer and distribution of property through lending. Business finance therefore encompasses various concepts such as working capital management, inventory control, financial statements, budgeting, and borrowing.
The key concept underlying business finance is money management. In money management, a company focuses on using available funds to make its most profitable investment decisions. One important factor in money management is liquidity: which means, basically, that a company must always have access to enough liquid capital so that it can continue to conduct business as usual. Another important feature of money management is credit worthiness, which refers to a company’s capacity to generate new creditworthy enterprises. A third important concept involved in business finance is liquidity the ability of a creditor to sell a borrower’s debt (or equity) at a sufficient price so that the debtor receives what it is entitled to.
Many business finance businesses focus on obtaining finance to expand their existing business or to acquire a new, viable enterprise. In either case, business loans are often used as the method of raising financing for those ventures. For example, venture capitalists typically provide business loans to start-ups to help them meet their cash flow requirements as they seek to grow into a highly competitive market. Also, venture capitalists often provide business loans to companies looking to expand their business by purchasing additional office space or signing agreements to purchase land and building. Business finance businesses may also be helpful to entrepreneurs seeking to obtain venture capital as they develop and test business ideas before turning them into successful businesses.