The service of providing funds or capital for commercial or private reasons comes under the umbrella term – Finance. As a branch of a broader subject ‘economics’, it can also be viewed as a method of managing assets. This subject is also referred to as a system of administering money used by the private and business sectors. People that look after or manage the arranging of finance are called finance managers.
Managing this involves dealing with the optimization and allocation of funds to various areas either by borrowing or by using those available from internal resources. The way this works is that managers work to keep the cost of their borrowing low whilst passing this cost on with a an additional percentage to the client enabling a profit to be made. Bad debts are poor finance management where rules have not been followed; the result of this is depressed markets, low production and a cash crisis. This is why people who act as finance managers only have this type of work for a relatively short period because the potential risk to companies is high and so are the stress levels as a consequence.
One of the most famous management gurus Lee Iacocca referred to finance managers as Bean-Counters who almost look at the expense part with a rather pessimistic view. Unlike the sales managers who would like to invest in the future by product development, finance managers are rather skeptical of financing a project whose benefits lie in the future; even though their management governs future outcomes too. Unfortunately when you are running a small business, the boundary lines between a personal loan and a business loan can be a little blurred and often the planned arrangement is not used as was not used for its original purpose. Generally lenders who are investing in a business situation like to know exactly what their money is being used for.
Hopefully by educating the small (and large) business owners of their fiscal responsibilities they may build the basis of an improved company in the future. Small businesses can be very flexible, however, and call upon friends, other businesses, family members, even their own bank for finance. Lenders prefer to use money from elsewhere because it lowers their risk but still allows for a healthy profit to be received by the finance company. Bob Hope once said that you can only get a loan from a bank if you can prove to them you have absolutely no need for it; advice which could not be more true.