Finance is the core component of any business since without it would absolutely be impossible for any business to implement its plans and strategies. There are many ways in which a small business would obtain finance at start up and running; these include from loans, unsecured loans, grants, sale of finished goods and services or inventory, bank overdrafts, and contribution from the shareholders of the business which is called the equity of a business, and it is a permanent financing to the business hence can be used to purchase and invest in longer assets since the business has no legal obligation of paying it in the future.
Sources of finance for a business is normally categorized according to the relationship with the party giving and the time in which the finance will stay in the business before repaying them back. These types of finance include, loans, which is given by the party which has a long time reputation about the business or has assessed whether the business has there capability of paying them in future, the loan can be long-term or shorter depending on the amount of time that it will fall due.
There other type of financing such as lease financing, this is a situation where an individual grants a legal permission to another party the lease to use their assets and in return pay them rents according to the agreement and the legal obligation. A business would need financing for various purposes such as, purchase of equipment and raw material inventory, promotional materials for the business.
There are various microfinance institutions that have come up to offer small business loans to businesses at start up or to run the business. Some businesses have opted to secure grants for the business. There are numerous funding that are available in the world of business today owing to the increase in technology thus businesses must keep abreast with it in order to obtain the required profit and the market share.
Different businesses have different financial needs, thus it is paramount for them to assess their business needs and other factors before securing a loan.