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Why do businesses need finance

Why do businesses need finance

Starting a business of you roan may seem like the most obvious answer to the soaring unemployment levels across the globe. However, starting a new business costs money and thanks to the current economic climate, the average middle class person anywhere in the world simply does not have the kind of personal savings that can help them start and run their own business without external finance. We find out why finance is so essential for businesses.

To get started

Say you want to start a business selling handmade babies’ woolen booties but you don’t have enough money in your personal account to fund the cost of getting a website of your company, all the licensing fees, an initial batch of samples etc. Depending on the well being of your credit history, you can get finance through a bank loan or get it through investors and use it to build your business.

To expand operations

Now let’s assume that your homemade woolen baby clothing has done well and your customers are now demanding that you also begin selling baby shoes that match your existing line of clothing. That kind of thing again requires you to invest more money into the business. For such purposes, getting financed is a fantastic idea and investors and banks are generally a lot more open to offering finance to thriving businesses rather than fresh startups.

To get through tough times

Businesses are notorious for losses. Whether you have failed to sell off a particular product line or have incurred a loss through destruction of unsold product, theft or accident, a financial blow is often hard for any business and again, unless the business owners do not have personal resources to throw back in the business, getting finance to overcome an economically tough period becomes essential for a business.

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Editor-in-Chief and lead author at WhyDo