Financing is a broad topic which needs to be understood at a deep stage as it is important for each and every individual to understand basic aspects of finance as this is one of the most important aspects required to manage our life.
What is Financing:-
Financing is relating to providing money or funds to any business or individual for the purpose of purchasing, buying or investing. These financing can be managed through various procedures which are as follows:-
Personal Savings: One can save money in their life which has been earned by them through their jobs, services or businesses and these savings can further be used for fulfilling the desires of life.
Loans or borrowings: Loans or borrowings can further be classified into various parts as these loans and borrowings can be done by friends, family, commercial banks or by mortgaging. People often take this step for the purpose of generating finances for fulfilling their desires in their working segment along with their lives.
Also some people believe that their time is money and financing can be related to time as a person spends their time in hardwork through which they can earn money and therefore, people charge good interest for providing funds or giving money to other people as a loan.
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Example of Financing:-
A company called ABC limited has a plan for buying 10 machines for their company for increasing their production of goods and for purchasing those machines they will be needing funds equivalent to $1,00,000. After a proper analysis of their bank account they realize that they have funds around $80,000 in their bank account but they still being shorten in funds for almost $20,000 for which they planned to get financing done by taking $10,000 at 10% interest per annum from a local commercial bank and $10,000 through a friend as a personal loan.
The generation of funds here is financing.
Financing necessity:-
Need for financing arises when a person is being shorted on the funds required for the purpose of purchasing, buying or investing. A person needs to do these three things throughout their life for a smooth life and which sometimes can be higher than the amount the person has in his/her bank account or in cash and that calls for the need for financing. Financing is important for a person's regular life or for the purpose of development in their life as without financing both the things are not feasible.
Also it has been seen since ages that every big business has been started with the financing and there is nothing wrong in getting the financing done as to achieve anything one needs funds and having or providing funds for things can be done only with financing.
Therefore, financing is important in our life.
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