Learn of the different methods to raise personal, government and business finance to meet the costs and various needs of operation.
Employment and savings
You get a salary regularly for your employment. This is a great way to grow your personal funding. You should take the necessary training to improve on the job. Hard work and promotion will bring increase in salary and thus help to build your financial position. You can save some of your monthly salary. Savings are crucial to building a good amount of surplus. However, make sure you choose the right sort of accounts. Look for saving accounts that bring you more than that offered by commercial banks usually (4% to 6%). Interest on your saving help to grow your surplus.
On many occasions you receive gifts from friends, family and others close to you. This is a useful means of cash to meet your personal expenses and can even add to your reserves. You can save the excess amount or invest it to meet your financial plan.
Investing in stocks, bonds and other securities can be a great option in your financial goals to build good personal finance. With a proper investment strategy, you can divide your surplus by diversifying properly for short, medium and long term investments. The proper portfolio mix can bring you good returns. You will not only earn interest on your investments but capital gains as well.
Banks and other financial institutions offer different types of loans at various interest rates to help customers buy the things they need. You can borrow to buy your house, car, furniture and equipment. You can even even use such credit to meet other personal needs such as vacation and personal expenses. If the current interest to be paid for loan is affordable, you can use the opportunity. Use the bank money to buy liquid funds that you can sell when the returns are higher. You can also go for loans from other financial entities like non-banking financial institutions, investment banks, etc.
The methods of personal financing discussed here are simple and maybe most people know them. They are the most important factor that plays in influencing the size of your surplus, and investment decision is time. Go ahead according to the investment strategy and consistently without losing sight of your financial goal or the disasters that might strike in course of your life.
The governments use different methods and techniques to raise finance. Government financing refers to deliberate manipulation of expenditures and revenues of the government of a particular country. Basically, the government normally uses different kinds of expenditures and revenues as fiscal tools so as to achieve its different goals and objectives. The funds collected by the government is often spent in a variety of ways, including:
Paying for Security Related Programs: Government use a portion of the funds that they collect in paying for national defence as well as other security- related programs.
Education Programs: These are different programs related to education such as work study programs as well as secondary and elementary education. These initiatives are usually funded via the resources of the government.
Social Security: A certain percentage of the entire country’s population receive social benefits in terms of funds from the government. These beneficiaries include spouses of deceased employees, disabled workers and retired employees among other people.
There are more ways in addition to these ones on how the government spends its funds. So how does the government raise its funding?
Different Methods of Raising Government Funding
Fines and Penalties: People or firms that go against the rules of the country have to pay fines. The courts impose different these that become public revenue and thus add to government funds.
Taxes: These collected from different people and institutions, which are considered compulsory payments, are normally converted to government funds. The taxes that government agencies collect benefit every person in the society by financing different development projects of the country.
Public Debt: The government can get funding also through borrowing money from people or organizations within the country using treasury bills and bonds.
Selling Government Assets: The government owns very many assets in the country. These are in form of vehicles, houses as well as its stake in various firms. The government can choose to dispose such assets when it requires funding to handle any kind of project or activity in the country.
Through Borrowing: The government when in need of money can also decide to borrow from external sources such as World Bank, International Monetary Fund of from friendly countries, as well as commercial banks.
Stamp Duties: Such duties collected via the ministry of land on land transactions like land transfer also serve as government revenue.
Rent and Rates: The government can lease or rent its properties and use the funds it gets to fund its different programs.
Escheats: These refers to unclaimed properties of deceased people. Such properties can be converted by the government into funds.
The methods mentioned are some of the sources used by the government to generate revenue. One of the main objectives of collecting funds is to enable the government to be able to fund its different activities.
Mostly running businesses need additional money due to various reasons like funding operations or for expansion, etc. There can be various methods to raise finance for a business but the effectiveness of the method depends upon the way it has been used as well as on the condition of the business. Some of the methods to raise finance are briefly discussed below to help you in this regard, as follows:
The best way to raise money for business finance is to invest your own savings in it. You can mortgage as well as second mortgage your property for this purpose, if you do not have enough money in cash or in bank account. The main benefit of this mode of financing is that you have full control of your business instead of working under pressure for the shareholders and stakeholders.
Ask family and friends
The second best method to raise business finance is to ask your friends and family to help you in this regard. Their terms of financing your business can be better than banks and other financial institutions. Repayment in this case can be easier than banks.
Borrow from your bank
If you are raising money for a running business then you can also ask your bank to provide overdraft or loan. These will be useful for expansion or settling financial transactions. This is one of the functions of commercial banking. The interest rate on the business financing organized through bank overdraft can be flexible as they charge interest only on the amount used by your business. It is a better option than the bank loan at higher interest rate.
Invite external investors
Another good way to raise business finance is to issue shares for public investors. Your company’s financial statements such as cash flow and balance sheet will be necessary for this. Standard shares basically provide no rights or restrictions to the investors regarding the return of their money. Another benefit of inviting external investors is that they can also provide you with expertise to make your business better than before.
Bank loan on firm’s guarantee
This method of raising business funding is good for small businesses. The business owner need not furnish his personal guarantee for such loan. The state government works as a guarantor of the loan thus taken. However, you will have to pay an annual premium on the outstanding amount of the loan. Such loan has to be repaid in a fixed number of years as per the terms of the loan.
Thus, there are a number of methods that can help a business in raising business finance for its betterment as well as expansion, at easy terms.
Learn More: The information presented above should be of great help. You have see some of the different ways that finance is raised to meet the needs of individuals, government and businesses. If however you need more you can contact us for additional details. You can also read more from the book wisdom of finance you can buy at amazon.