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Need of Finance for Business

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January 9, 2022
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Introduction

Financing is the process of providing funds for business activities, making purchases, or

investing. Financial institutions, such as banks, are in the business of providing capital to

businesses, consumers, and investors to help them achieve their goals. The use of financing is

vital in any economic system, as it allows companies to purchase products out of their

immediate reach.

Why Need Finances for Business

Besides, expenditure on these requirements, finance is required for arranging the working

place, machinery, and equipment, working material, furnishing and salaries of the employees.

Thus, finance is required to complete the initial activities of the business enterprise.

To start a business it will need to finance the purchase of assets, materials and employing

people. There will also need to be money to cover the running costs. It may be some time before

the business generates enough cash from sales to pay for these costs. Link to cash flow

forecasting.

As a business grows, it needs higher capacity and new technology to cut unit costs and

keep up with competitors. New technology can be relatively expensive to the business and is

seen as a long term investment, because the costs will outweigh the money saved or generated

for a considerable period of time. And remember new technology is not just dealing with

computer systems, but also new machinery and tools to perform processes quicker, more

efficiently and with greater quality.

Establishment of Business Enterprises

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Finance is required for the promotion of the establishment of any type of enterprise. It is

required for registration of the company, for incorporation, for obtaining the certificate

for starting the business and also for obtaining permission letter. Besides, expenditure on these

requirements, finance is required for arranging the working place, machinery, and equipment,

working material, furnishing and salaries of the employees. Thus, finance is required to complete

the initial activities of the business enterprise.

For Infrastructural Facilities

Finance is also required for arranging those infrastructural facilities which are essential

for business entrepreneurship, although the volume of required finances may be high or low,

according to the coverage of various Enterprises.

Substantial capital is required for all infrastructural facilities, place, land, office site, plant

installation for the establishment of industries, place for conversion of raw materials into finished

products, water, electricity, telephone, etc.

For Marketing Expense

Advertisement and publicity production and distribution of new commodities and

services, incentives to the consumers, sale promotion, providing services and commodities at a

fair price are required, to face present-day competitors. For all these activities, finances are

required.

Labour Welfare and Social Security

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For the success of any business or enterprise, human relations between employers and

workers should be cordial. For that, the entrepreneurs should essentially safeguard the interests

of the employees and workers. They are to be provided with various facilities, like – that of

housing, primary treatment, health, education, libraries, and reading rooms, travel, etc. In

addition, they are also to be provided provident fund, gratuity, pension, old age, personal or

group insurance and accidental insurance, etc. All these need a substantial volume of finance.

To Pay for the Day to Day Running of Business

A business has many calls on its cash on a day to day basis, from paying a supplier for

raw materials, paying the wages through to buying a new printer cartridge.

Conclusion

Having said all of the above, it is clear that as much as finance is important for your

business, so is the management. Right from collecting funds to allocating and spending them,

organizational leaders must have a transparent view of all financial undertakings within their

organization and likewise, indulge in planning for efficient utilization of available resources.
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