Business finance is a wide term encompassing many things regarding the study, development, and management of small and large capital assets. This includes bank loans, merchant banking, leasing, financial statements, investment banking, mortgage banking, royalty investing, real estate financing, partnerships, acquisitions, divestitures, spin-offs, price issued orders, partnership interest, retained earnings, and ownership issues. The field is very broad and covers almost every business entity. Some of the areas of business finance that are more common include: Real estate and mortgage banking; corporate finance; venture capital; private lending; and entrepreneur capital. While most business finance specialists are accountants, most do have some background in finance, math, and statistics.
One area that is growing rapidly in business finance circles is venture capital funding. Venture funds are typically raised from private investors, but sometimes can also be obtained from public sources such as pension funds, city banks, or state funds. These funds are used to acquire start-up companies and to make large investments to create growth in the company. The capital is used primarily to sustain operations in the first few years and then as the company grows, the funds are used primarily to generate an exit strategy by selling the business. However, venture capitalists and angel investors use business finance to invest in companies that have good growth potential, strong management teams, and significant market opportunities.
Another type of business finance is asset-based funding. Asset-based funding occurs when a business relies on its existing assets – usually fixed assets – for financing. The typical model is for one business partner to assume the entire risk of an asset. Typically the partner will use his/her existing resources – equipment, inventory, land, buildings, etc. – to finance the assets. Asset-based financing is not appropriate for small and medium-sized businesses that do not have significant tangible assets.