business finance services

business finance services

Exploring the Evolution and Impact of Business Finance Services

1. Introduction to Business Finance Services

The choice of business finance services is vast. Firms need to raise external funds, most often in the form of debt, equity, and trade credit, to help them grow. These funds are typically raised from a variety of sources that include banks, non-bank financial institutions (NBFIs), financial markets and non-financial firms, both international and domestic. Businesses also seek a combination of financial intermediaries and financial markets to help them manage risks, optimize their working capital, manage their domestic and international foreign exchange (FX) positions, and invest excess liquidity. While firms can, if they desire, undertake these functions on their own, at least in theory, in practice, even the wealthiest corporations, such as General Electric, Walmart, and other members of the Fortune 100 or S&P 500, do not operate without the assistance of a variety of business finance services provided by the financial sector. Nor should firms rely heavily on their household members to provide their business finance services since such an approach can create significant agency problems, particularly when the interests and characteristics of the owners and managers can diverge from those of the firm.

A core function of a financial sector within a modern economy is to enable firms to carry out business finance services in as efficient a manner as possible. Business finance services are critical to enabling businesses to operate. They allow businesses to undertake any investment, production, and marketing activity that generates value. Without well-functioning business finance services, firms will be much less able to grow and contribute to the economy, innovation, investment, job creation, poverty alleviation, and the diversity and quality of products and services available to businesses and the population at large. Indeed, efforts to develop and expand sectors such as agriculture, manufacturing, tourism, healthcare, education, and technology in many countries will be significantly constrained without adequate business finance services. With business finance services playing such critical roles in the economy, any small- or large-scale enterprise, informal or formal firm, sole proprietorship or corporation should have access to competitive and diverse business finance services that are responsive to their unique needs and preferences.

2. Key Components and Functions of Business Finance Services

The operation of business finance components of an organization mentioned above could have the influence of a middle-level management personnel’s approach to attain the concept of performance tip. In order to achieve the performance tip, the status of different business finance components of a department into low and declining/moderating. However, the cash flow resulting from the operation is adopted and the time limit for the repayment tied to an organization with a reserve formulated as debt ceiling. The concept of performance tip would involve converting the percentages of different businesses as high plus accounts. The weak links in the process are converted into average with the initial operating operating cash operating leverage constraints. A good organization which is operating within the capital structure in an organization would be having high plus accounts. If knowledge is not taken with a reserve, to reward for the credit management department, either through extent and priority, the delivery through the organization would be high ops.

The various components of business finance form the backbone of an organization, or could be better termed as an organization’s lifeblood. Various components of business finance in an organization can be different, which may in turn depend on special circumstances and specific operational requirements of an organization. However, the generic names of components which we find in any commercial and procurement proceedings of an organization are: credit buyers accounts, stock finance, import finance-sight LC, bills purchased, import finance-usance bill, export finance, etc. The requirements of the components listed above are only the cash needed for the operating needs on day-to-day operations such as trades, its sales, and targets.

3. Technological Innovations in Business Finance Services

Business finance services have over the past decade undergone a revolutionary transition from a paper-based model to their latest stage: an electronic era. Initially, the transition had been driven largely by card-based systems, as was suggested. In 1985, however, the authorities decided to make the facilities generally available for both business and personal customers. Then businesses of SF 600,000 turnover or more have been able to use EFT amid increasingly popular services such as payroll, creditor, and standing orders through direct access to the Bank, whilst those of 200,000 may obtain direct access to the CRT services enabling them to carry out a wide variety of transactions in their own offices.

Historically, the cost of running a bank branch or office has been very high in relation to deposit and credit sizes, thus providing strong incentives for banks to seek to minimize the transactions-processing role that branches and offices perform. Banks have had various substitutes for the branch/office network in catering to the particular requirements of business customers. “Transaction banking” has thus come to cater for the processing requirements of business, such as providing small change, paying in revenues, making payments, collecting standing orders, drawing foreign exchange, and revenue bills. It has meanwhile established the reputation for client care that depository financial institutions have long dominated the business banking sector. With the wealth of banking products marketed by today, shop around for exactly what you want.

4. Regulatory Framework and Compliance in Business Finance Services

The enterprise/organization providing the unique service becomes a sub-category defined as the ‘service administrator’ or ‘product administrator’. When business financial services are tailored to the unique needs of SMP/SMEs, as BFS (specifically for business accounts) and are marketed as such to boost growth, employment, poverty alleviation, and the economic vitality of the communities in which they are located, they benefit in many different ways. Regulations for financial institutions are created for various reasons, among which consumer protection is a prime concern. Such institutions can be categorized broadly according to their size and nature of business, as follows: central banks, monetary authorities, development banks, commercial banks, specialized industrial (development) banks, rural banks, savings and loan associations, thrift and loan organizations, etc. When banks and financial institutions only serve the middle and upper market segments and not the microfinance and SME market segments, it indicates an unequal or unfavorable financial service situation.

To understand the regulatory framework and compliance in relation to business finance services (BFS), it is important to define the ‘service provider’. Within the context of regulatory frameworks, the service provider is defined as the enterprise/organization that offers the service, while the ‘product provider’ is the manufacturer/supplier of the product served. By distinction, ‘regulatory compliance’ differs when the organization is intentionally servicing a group (segment) of customers who may be perceived to have unique financial service needs. A segment is defined by its common characteristics, as either an individual (consumer), enterprise, business accounts, or some groups of businesses. The impact of segmenting distinct unique business needs is indicative of its efficiency and impact on financial service offerings.

5. Future Trends and Opportunities in Business Finance Services

The four key fields for future research are micro-enterprise and SME finance in the informal sector. The policy community needs to reassess its attitudes and approaches to financing informal sector enterprises. Most small business owners would like to move ‘up-market’ in terms of the growth potential and profitability of their business. Actionable research could identify more effective temporary transfer of the ‘careful regulation’ function as the national market becomes mature enough. There is also a case for research on how the design of financial institutions themselves can encourage competitiveness and the uptake of innovations.

The shape of the future finance market in low-income countries is influenced by external pressures in the host country. Realizing the potential of business finance services raises key questions about the balance between careful regulation and open competition, between public and private finance, and between internal resource mobilization and external funding. Simultaneously, it highlights the differing needs of small and large businesses, the advantages of electronic access to information, the strength of institutional self-help, and the practical use of external financial support. Several key stakeholders can play a role in influencing the future of the four broad fields identified in this report.