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. Financing is key to Fundera’s business model, for instance. It is difficult to gain financing while in financial distress.
We all know that , production is the outcome of five factors of production, land ,labour,capital,entrepreneurship & organization.these factors are mutually dependent on each other.the availability of all the five factors in proper proportions is very necessary to produce the desired level of production.having prepared the project report,the time comes when the entrepreneur needs to decide on the need for & sources of finance as per his/her projections made in the project report.
Need for financial planning:
Finance is one of the important prerequisites to start an enterprise.in fact , it is the availability of finance that facilitates an entrepreneur to bring together land ,labour, machinery and raw material to combine them to produce goods .the significance of finance in production is elucidated like a lubricant to the process of production.there are others also who hold even the metaphorical views that finance is the life blood of enterprise.
The decisions taken by the entrepreneur well in advance regarding the future financial aspects of his/her enterprise is called “ financial planning”
In a financial planning , the entrepreneur should clearly answer the following three three questions:
How much money is needed
Where will money come from? And
When does the money need to be available?
In above this figure we can see a classification of financial needs. In this financial classification we can observe how many ways classify this financial needs . on the other hand, it has also some sources where collecting can raise the required funds could broadly into two sources: these are:
Sources of institutional finance:
Written By –jannatul ferdous Anonna