MANAGING FINANCIAL RESOURCES AND DECISIONS

Managing Financial Resources and Decisions



Managing Financial Resources and Decisions

Introduction

The main purpose of this paper is to show the importance of source of finance available to a business. Finance is a very important factor in any business. A business needs finance in order to make improvement in it. There are many sources through which a company can receive its finance, and increase its capital.

Discussion

Finance is the life blood of any business. For any business, there is great importance of finance. In order to acquire the finance, businesses seek for different sources.

Section 1: Major Sources of finance available for business

1. Own finance - You may choose to start your own business using your own financial resources. This may be from savings accounts or other investments that you have. Typically, it is not advised that you should fund your start-up from personal overdrafts, loans or credit cards as these are not necessarily tailored to your business needs or requirements.

2. Family and friends - You may have family and friends who wish to invest in your business. This is often convenient and may allow you to get finance on favourable terms. However, make sure you have a formal agreement of loan terms in place so you or your family and friends are not left unprotected in the event that you are unable to repay the loan.

3. Banks: The most common forms of finance used by start-ups are:

Business overdrafts - Banks offer overdrafts as a form of short-term finance. These are available to companies that have business current accounts. They are a good way of covering any fluctuations of money coming in and going out of your business.

Term loans - Loans are designed to help you buy equipment and supplies for your business. They are best if you need to buy fixed assets, such as machinery or office equipment, where the amount you need is not going to change.

4. Grants - These are a good option for businesses looking for financial assistance for specific projects. Typically, funding comes from EC and UK government sources, including local authorities, charitable trusts and corporate sponsors.

5. Loans - It is not just banks that can provide a loan. Business support organisations such as enterprise and development agencies can help businesses looking for loans. The National Enterprise Network is a good example:

6. Business Angels - Often high net worth individuals, Business Angels invest in high growth businesses on their own or as part of a syndicate. In addition to providing finance, Business Angels often make available to companies their own skills, experience and contacts.

7. The Prince's Charities - This is a group of not-for-profit organisations, headed up by The Prince of Wales who acts as Patron or President. A good example of support available to start-ups is from the Prince's Trust Enterprise Programme, which helps unemployed young people aged 18-30 work out if their business ideas are viable and whether self-employment is right for ...