Why do businesses need finances?

One of the key considerations when starting a new enterprise is how to raise the finance to purchase equipment or fund your day-to-day expenses. Every business needs to have a clear plan for where it is going and what it is trying to achieve. Finding investment to start a small business can often be arduous and time consuming, particularly if you have no trading history, few savings, poor credit ratings, or no security. All businesses will need finance at some stage in order for them to start up, grow in size, perhaps buy new machinery, or help with the day-to-day running of the business.

WHY DO BUSINESSES NEED FINANCES

There are many reasons why a business would need finance. Sometimes finance is needed for just a short period to help overcome a temporary shortage of funds, for example when waiting for a customer to pay a large bill. On other occasions, finance may be needed for a much longer period, for example when buying a new building.

My business I want to start up which is courier service will need an approximate of £50,000 highest, because all I am mostly going to need is a place to set the business and the vehicles. I would have saved enough to get to that amount of money because I would have planned, I could also lend money from family and relations that way it saves me from having to borrow money from the bank and paying interest.

Finance can come from a number of different sources within the business, or from outside the business. Finance that comes ...

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Finance can come from a number of different sources within the business, or from outside the business. Finance that comes from within the business is known as internal finance and finance that comes from outside the business is known as external finance.

Not all sources of finance are available to every business because sole traders and partnerships (unincorporated businesses) are not able to raise finance by selling shares, limited companies (incorporate businesses) cannot take extra partners in the hope of raising more finance, businesses with a poor financial record are unlikely to find many banks willing to lend money etc.

In my case, I think the methods of finances that would be suitable for my business are

Bank loans: this method of finance would be suitable because it may be useful to help finance some form of business development or the purchase of new equipment. Moreover, help a new business start up.

Hire purchase: this is a system of obtaining items in return for a monthly payment over a given period. The items do not become the property of the user until the final payment is paid. Computers, Lorries, company cars are examples of items obtained through hire purchase.

Mortgage: this finance involves a very long-term of borrowing money that requires some form of security. This finance is useful to help fund the purchase of property. It can be suitable because if I do not have enough money to buy a property for my business then I can get a mortgage on the property I want.

Below is the cost of borrowing money:

FINANCE FOR PUBLIC ORGANISATION

Public co-operations obtain their finance from different sources. For instance, the BBC receives its money from the sale of television licences and the sale of TV programmes to other countries.

Hospitals and schools, for example, receive most of their finance direct from the government. The money will have come from the taxes that have been collected, e.g.