What is finance about

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Self-Employment Financing:

In most cases you will require finance (capital) in order to enable you to go into business on your own. You will need money not only to establish the business (and depending on the type of business, money may have to be spent on rent, furniture, materials, equipment, goods for resale, advertising, and so on) but also to provide for your own needs – and possibly those of your family – until such time as sufficient income is generated from the activities of the business to meet all the necessary expenses and to provide you with an income.

Remember that, unless you start the business off on a part-time basis (whilst still working full or part-time elsewhere), you may not be able to receive (or ‘draw’, as it is called) a salary or wage during the early days of the business. Also, you may need a ‘reserve’ in case unforeseen problems or circumstances arise which may affect your business; for example, there may be a strike at the factory which makes the goods your business sells – in which case you will have nothing to sell. If you do not have a reserve of money to fall back on in difficult times, your business may fail, through no fault of your own.

The man that reaches the top is the determined, spirited, hard worker and never the fearful, hesitant, slow worker.

The amount of capital (finance) which you will need in order to start a business will depend on its type and size. For instance, a carpenter may need relatively little capital; he may need a workshop or a store, and will have to spend money on tools, timber, etc. But if that same person decided to start a factory to manufacture furniture, he would need far more capital. Similarly, a person deciding to run a kiosk (selling sweets, beverages etc.) or a newsagent shop, would need far less capital than a person starting a shop selling, say, radios and televisions. Not only would the former have less to pay in rent, but the cost of the stock which they would have to have available for sale would be lower in the total value.

You may have some or all of the capital you need from your own savings, or you may need to borrow some or all from friends or relatives. Alternatively, you may have to borrow some of the capital you need from a bank or another financial institution. In such cases you will probably have to provide some ‘security’ or ‘collateral’, in the form of a building or land or some other tangible asset (possession), which the lending party could seize in the event of your failure to repay all or some of the money you borrowed. Also, you are likely to have to pay ‘interest’ on the money borrowed, in addition, of course, to repaying the actual amount borrowed. The interest can be heavy, and a burden on the business, as it will have to be paid from the income received.

Government Sponsored

(In some countries there are – usually government sponsored – organisations willing to assist small ‘new’ business to become established; they have funds available to lend to the new businessman at low rates of interest and on easy repayment terms – find out about any such organisations/agencies which exist in your own country).

Before you can start, or take over, a business, you must also be sure that you can obtain any licenses or permits that may be needed in your particular country. These vary so greatly from country to country that I can only advise you to consult a lawyer or your local trade and industry officer, chamber of commerce, or another person or organisation who can provide the full and accurate information which you must have.

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