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Finance is the general term applied to the commercial service of providing funds and capital. This is part of the area of economics that focuses on the strategies and methods of looking after money and other financial 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.
Simply put these managers arrange money to be lent to businesses or private individuals using either money already available from company accounts or from external lenders. The term optimization is used to explain the procedure whereby finance is maximized by reducing costs and increasing the return. 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.
Finance managers can be very short sighted, only looking at the initial cost involved and not the future return capability of the project. Finance managers are people who always like to see where they have been and do not look towards the future in the same way that a sales manager does. When arranging a business loan, many applicants forget that they are not to be used for personal matters; something that is ignored regularly. Generally lenders who are investing in a business situation like to know exactly what their money is being used for.
Businesses are gradually getting the message that they must behave more responsibly if they are to stand a chance of expanding in years to come. Small businesses are not however, restricted to using external finance companies because other sources do exist including their bank, friends and other types of private lender. 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.
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