Corporate Finance 101: All You Need To Know

Corporate Finance

Cash flow is a key aspect of any business and quintessential to its smooth operation and long-term success. That being said, there are a variety of instruments that help businesses maintain cash flow and the overall financial stability. This is where corporate finance comes into the discussion. Corporate financing plays a vital role in all kinds of businesses. Regardless of the size, nature of operation and other factors, every business needs streamlined corporate financing to ensure long-term financial stability and growth.

What Is Corporate Finance?

Corporate finance is that aspect of a corporation which deals with the capital structure. This includes everything ranging from the funding of the corporation to the finance related steps taken by the management to enhance the growth and the overall value of the business organization. The area of corporate financing also includes various tools and analysis needed to distribute the financial resources of the corporation.

The key aim of corporate finance is the maximization of the overall value of a business. This is achieved through planning and implementation of resources, along with the assessment of risk and balancing risk factors and profitability of the business.

How Corporate Finance Works?

Business streamline their corporate financing arm to achieve two key objectives, which are:

  1. Optimal wealth distribution
  2. Generation of revenue and return on investment

In other words, the field of corporate financing includes all activities and transactions that are associated with raising capital of a corporation. These steps are taken to create, develop and acquire a business. These activities are related directly to the decisions of the management that lay a financial impact on the organization.

Corporate financing can be considered to be a liaison between the business organization and the capital market. When we say it includes certain financial and investment decisions, it includes four primary aspects which are:

  • Planning finances
  • Raising funds
  • Investing
  • Monitoring

The Various Types of Corporate Financing

The basic idea of corporate financing is about raising funds for the business. This can be done in either of the two ways:

  • Equity
  • Debt

That being said, corporate financing can be classified into two major categories based on certain basic characteristics and features of each of the categories. Let us take a look at these two basic types of corporate financing.

Owner’s funds

This kind of financing is also known as ownership finance. Equity or ownership financing is strictly limited to raising funds for the owners of a business organization. The capital raised is directly utilized by the owners of the corporation which may or may not be associated directly with the business.

Debt funds

This is also known as external finance. Debt funds are available in different forms and come with multiple options which include the mentionable ones like debentures, private financing, corporate loans, etc. Generally, debentures can be issued to the general public for the purpose of refinancing but the primary source of private finance are institutional lenders.

In Conclusion

Different options for corporate finance in India are very much accessible from numerous lenders all across the country. They offer a range of loans to offer financial assistance to businesses that are in need of capital. From collateral free business loan to SME/MSME loans, equipment financing, merchant cash advance, etc business owners have a lot of options available along with flexible and tailored repayment options for streamlined business finances and adequate cash flow of the business.

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