Business finance is a broad term encompassing things about the study, development, management, and accumulation of funds for the purpose of sustaining a business. The discipline often studies long-term business plans, corporate finance, liquidity, borrowing, investment, and returns on investment. A business is said to be financially healthy when its total assets, including fixed assets such as plant, buildings, equipment, and inventory, are greater than its liabilities, which include liability arising from loans or leases. The study of business finance is therefore an intricate one that involves many interrelated fields of study, each with its own definition and scope. Some of the most important areas of business finance are business credit, merchant banking, venture capital, indirect lending, financial markets, and international finance.
In addition to these areas of study, there are many others, such as business valuation, business hedging, merchant banking, and venture capital. Venture capital is one of the fastest growing fields in business finance and refers to injecting money into a new company in exchange for shares of its stock ownership. Venture capital funding is required for many successful start-ups and is used not only for buying shares but also for raising money through other commercial loans, such as commercial mortgage loans.
Business loans, also known as business loans (or business mortgages), are typically obtained through banks and are therefore crucial for business financing. Commercial mortgage loans are created by mortgaging a home or other real property for the amount needed to provide cash for start-up costs and for repayment of debt. This type of financing is based upon the equity value of the property, which represents the value of the business as of the date of the loan. The loan is secured by the value of the property and therefore has very low interest rates. Private lenders are unlikely to provide business financing, as it is seen as a risk to their own finances; however, private equity groups, conglomerates, and other similar investment firms may help finance the purchase of a business. Many large companies use outside funding sources for growth and expansion; however, small businesses can also use small business financing from sources within the business or from a third party lender.