Why business needs finance
Finance refers to sources of money for a business. Firms need finance to:
- start up a business, eg pay for premises, new equipment and advertising
- run the business, eg having enough cash to pay staff wages and suppliers on time
- expand the business, eg having funds to pay for a new branch in a different city or country
New businesses find it difficult to raise finance because they usually have just a few customers and many competitors.
Lenders are put off by the risk that the start-up may fail. If the business does fail, the owners may be unable to repay borrowed money.