Financing provides the least expensive means to finance a business purchase or develop a business. Banks offer varying terms on the finance options and usually require a sizable down payment. The advantages of using bank owned financing are the security that the business is owned by the bank and a history of successful paying accounts. While most banks require a sizeable initial deposit, some do not.
While many companies must finance their start up, growth and expand to obtain success, finance can be used for operations once a company has achieved its financial goals. There are several types of finance available and understanding the advantages and disadvantages of each can help determine which is best for the needs of the business. Borrowers can obtain startup finance to finance the initial start up costs. Commercial loans can be used to finance equipment, buildings and facilities. Business finance can also be used to acquire technology, real estate and supplies essential to meet the daily operations. A bank will review all relevant business and financial documents to make an informed decision about financing.
Financing provides flexible options that can be tailored to meet a company’s specific financial goals and objectives. There are advantages and disadvantages to all methods of finance, including line of credit, merchant cash advances, invoice financing, franchise finance, commercial loans, commercial property and sub-prime lending. Companies that are well positioned to capitalize on opportunities will find the advantages of finance most beneficial. Key advantages and benefits of finance are described below.
Benefit with no negative time value. There is flexibility in the repayment method, with interest only payments occurring at designated intervals. Finance provides the option for increasing cash flow as the business earns more profits. The finance costs are included in the gross profit and therefore do not contribute to the gross or net profit of the business. There are also advantages with a long term loan, as the principal amount remains secure, even if the business takes a longer period of time to achieve the desired level of profitability.
No time value. There are no taxes or interest charges associated with the principle amount, so there is no income tax or other charges. There are no redemption fees, which can result from non-payment of borrowed funds. The principal amount, interest rate and finance charge are all included in the gross profit, which is the amount of profits after expenses have been deducted.
Advantages and Disadvantages There are advantages and disadvantages to each method of finance. It is important to consider whether the advantages and disadvantages outweigh the potential benefit of the new methods. When there are significant disadvantages, it may be better to use the traditional budgeting software or traditional methods, while there are some advantages, the advantages could offset the disadvantages. In addition, financial planning software programs could offer a wide range of options and could easily help an accountant or business owner choose the best options. While considering the advantages and disadvantages, it is important to look at the big picture – how a change in the principles of finance could affect long-term profitability.
Finance principles can affect every aspect of a person’s life and choices. Although public finance has been around for thousands of years, its role in society has been growing. Finance is now an integral part of many areas of public and private life. There are many different types of programs in public finance, but most programs rely on principles that were first described in a famous book by Omaha economics professor George Sthenberg.
Public finance is necessary for the efficient performance of the business, for its management and for ensuring the stability of the economy. If the business is able to make sound financial decisions, then the company will be able to provide good jobs to people and maintain a competitive economic status. A successful business is one that can predict its own future performance and take steps to ensure that it continues to grow responsibly. As with any other part of the economy, business managers need to take an active role in ensuring that the company continues to become profitable.