business finance

Different Sources of Business Finance & Its Importance

November 19, 2022 • 2836 views

Finance is the core of every business irrespective of size and type of business. It contributes to the growth and expansion of the business. To run any business efficiently, financing is a must, and there are various ways one can choose to finance their business. 

With advancements in technology, there are plenty of options available for any business to get finance from. Moreover, with digitization, companies can deal with any financial crisis by quickly applying for a loan from lenders such as banks and NBFCs. Features such as quick disbursal, a completely online application process, good customer support, minimal documentation, etc. make it even more convenient for businesses to opt for a Business Loan

What Is Business Finance?

As aforementioned, finance is the core of every business, and business owners need to constantly look for financing options to operate the business. The funds which are availed by the business owner to operate the business are known as business finance. These funds can be used for various purposes, such as day-to-day business operations, purchasing any raw materials or goods, buying any fixed assets for the business, etc.

Also Read: Business Finance: Meaning, Sources, and Types 

Different Sources of Business Finance

Inventory Financing

Inventory is generally used by companies who are looking for urgent funds. Inventory financing is a short-term financing option where a company keeps its inventory as collateral to get funds from the lender. There are two types of inventory financing options available for the business: inventory loan and inventory line of credit. Inventory financing is popular amongst micro, small and medium size companies.

Invoice financing

Businesses use invoice financing where they borrow the money against the amounts due from the customers. This is a short-term financing option that helps in improving the cash flow of the business, paying any short-term expenses, pay employee salaries and suppliers.

Financial Institutions

It is one of the traditional types of financing options where the companies go to the financial institution, which includes banks and NBFCs, to opt for a loan. These financial institutions have certain criteria for different types of Business Loans.

Why is Business Finance Important in Modern-day Businesses?

Business finance is an ongoing process that requires a complete understanding of the nature of the business. In modern-day business, business finances help in dealing with the immense competition and high demand of customers. With the increase in the competition in the market, customers have numerous choices for a particular product. This ensures that companies are always on their toes to provide the best products; and to ensure that the products are of high quality, businesses require business financing.

Check out the key points highlighting the importance of business financing mentioned below.

  • Easy availability of the funds

Businesses constantly require financing to deal with various short-term and long-term financial obligations. Better business financing ensures that there are enough funds available throughout the year. Poor business financing can lead to the shutting down of a business or may impact the functioning of the business.

  • Perfect balance of capital structure

To ensure that the business is running efficiently in the long run, there should be a perfect balance in the capital structure of the company. A capital structure of the company includes a perfect balance of debts and equity and too much of both can impact business negatively. Business financing ensures that the company is not giving too much equity.

  • Better utilisation of funds

A complete understanding of business financing will help the company to focus on certain important aspects of the business. It will help in reducing unnecessary costs and expenses. Furthermore, some assets remain idle for a long time and increase costs and expenses. It helps in cutting down those unnecessary investments in the company.

Also Read: Why Managing Working Capital is Important for Future Funding?

What are the documents required for a Business Loan?

When you apply for a Business Loan, certain vital documents are required to be submitted to the lender. These documents include basic KYC information including company documents, personal documents, and business documents. Business address proof includes utility bills or rent agreements, and financial documents that include the bank account statement from the previous 6 months.

How to apply for Business Loan with Poonawalla Fincorp?

You can apply for a Business Loan with Poonawalla Fincorp by following the below steps:

  • Step 1: Visit the official website of Poonawalla Fincorp 
  • Step 2: Click on the Business Loan, go to Business Loan
  • Step 3: Check the eligibility criteria for Business Loan
  • Step 4: Click on ‘Apply Now’ under the Business Loan

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