Finance, Financing

Finance is a branch of economics that deals with the management of funds, financial resources and other assets. In broader terms, finance is raising or investing money either as equity or debt. Finance is a wide-ranging term which includes funding, investments, trading and risk management (through various types of insurance policies).

Finance is a branch of economics that deals with the management of funds, financial resources and other assets. In broader terms, finance is raising or investing money either as equity or debt. Finance is a wide-ranging term which includes funding, investments, trading and risk management (through various types of insurance policies).

Finance: Financial Assets

Finance involves investment of funds in financial assets, such as stocks, bonds, mutual funds and private equities for income generation. Financial institutions like banks play a major role in funding these financial assets. Investment in financial assets is generally extensive so it must be protected by risk management and risk transference organizations like insurance companies.

Finance: Types

Personal finance focuses on the extent of funds that are required by a person or a family. This further includes protection from mishap, transfer of assets through inheritance and the impact of tax policy on personal finance. Personal finance also includes financial planning and access to credit.

Corporate finance: This type of finance uses the principles of finance to help corporates raise funding and to help investors earn good returns from meeting those funding needs, usually with the help of corporate bankers or financiers. The objective of corporate finance is to maximize the valuation of financial assets, while striking a balance between the risks and profitability potential of the assets. Corporate finance takes into account the valuation of financial assets primarily for tax assessments and business analysis. Corporate houses focus on making either long-term capital investments or managing working capital for the short term. It also involves finding short- and long-term funding for corporations. While short-term funding can be obtained from banks’ line of credit, funds for the long term can be acquired by issuing equity or bonds.

For investors who want updates and advice on any financial matters such as savings, investment, retirement planning, portfolio management and asset management, it is best to seek financial advice from a trustworthy financial advisor.

Essential Funding For New Businesses 

Getting things off the ground can be one of the most difficult aspects of a successful venture.  There are a number of pressures you’ll instantly have to deal with, such as finding suppliers, employing new staff, winning new business, and making sure customers pay their invoices on time.  You’ll also need a ready supply of cash flow for all those eventualities that may occur in the day-to-day running of your business.

Securing finance to assist with all these pressures is becoming increasingly difficult in the current economic climate.  Lenders are less likely to provide the desired funding, with traditional financiers more likely to be looking to consolidate their position on the market as opposed to putting money into new businesses.

There are however, certain non-traditional forms of finance that can assist with the issues faced by start-ups, the most popular of which being invoice finance.

What is invoice finance?

Invoice finance can be split into both factoring and invoice discounting, and is a flexible funding solution that provides a steady flow of cash, increasing as a business grows and develops.

Through invoice finance, there is an option to have a Factoring service whereby,  as soon as a business issues an invoice, it will be provided with an agreed percentage of the total immediately, with the remainder secured (minus an agreed admin fee) when the customer pays the invoice in full.

What are the benefits of this kind of service?

Money tied up in invoices makes a business appear healthy, but it doesn’t add up to money in the bank.  Invoice finance provides an instant flow of cash as soon as an invoice is issued, whether or not the business has ever issued any invoices before.  This is ideal for start-ups, as once they issue their first invoices they don’t have to wait for them to be fulfilled; their cashflow will be instant.

In addition to this the more invoices are issued, the more funds that can be provided through invoice finance.  As the business grows, so does the potential for cashflow.

What are the different kinds of invoice finance?

Invoice finance can be broken down into two distinct products; factoring and invoice discounting.

Factoring

With factoring, the funder takes control of the sales ledger, chasing customers for settlement of invoices and managing the credit control of the business. This leaves time for the business to get on with the day to day running of the operation.   Customers will be aware of the business contract with the factoring agency.

Invoice discounting

With this option, the business will retain control over the sales ledger, keeping an element of confidentiality in relation to their customers.