Finance is the financial system that is concerned with managing money efficiently and in its simplest concepts it is usually classified as one of the branches of applied economics and finance is the supply of necessary funds in times of need or the provision of cash necessary to pay and develop a private and public projectAnd finance is a process associated with financial activity activities include investing or buying something or providing money for a specific purpose.
The main function of finance is to help companies or consumers achieve their goals by providing additional capitalTypes of financingBorrowing finance where it constitutes money provided by an external lender such as a credit union, bank or building societyAnd equity financing as it represents the money obtained from within the companyWhile the sub-types of it are personal, corporate and public finance, there is real estate finance, car finance and other types that must be well known before taking this step to create a new project and direct financing.This type of financing expresses the direct relationship between the lender, the borrower and the investor without the intervention of any financial intermediary, whether bank or non-bank and indirect financing.
Indirect financing
It refers to all the indirect ways and methods through which financing can be obtained, represented in the financial markets and banks, in which financial intermediaries collect financial savings from economic units with surplus .
local financing
This type of financing depends on local financial institutions and financial markets, and includes direct and indirect local sources and international financing.
Other regional institutions in addition to international financing programs provided in the form of subsidies or investments of some kind.
equity financing
This is one of the most classic ways to obtain financing, which is internal financing, i.e. from within the company itself, where companies seek to increase their capital through issues or offering the company’s shares.
This financing is generally applied to seed financing for start-ups and new companies and is applied by large companies in order to raise additional capital to expand their business and general financing.
Public finance
Public finance deals with the study of state expenditures and income and is only intended to consider the financial affairs of the government. The scope of public finance includes the collection of available financial resources and their allocation between the different sectors of state activities that are considered essential functions or duties of the government and private financing. Private financing refers to an alternative method of financing companies that helps them collect Money to avoid cash problems in a limited time frame
Basically, this method helps companies that are not listed on a stock exchange or that are unable to obtain financing in such markets.
Financing Terms
The conditions differ from one party to another and from one financier to another according to the policy of the entity that grants the financing.
It also differs as to whether the financier is local or international, but there are general conditions that must be met, such as the commitment to implement the projects as planned and knowing what projects are being invested in and whether they are legitimate or No and limit the guarantees provided by the applicant for financing.
Finance and its relation to the economy
The field of finance is closely related to the economy, so the financial manager must be a student of economics and be wary of economic fluctuations within the country and changes that occur in economic policies.
He must also be able to use economic theories to achieve efficiency in the company’s activities. For example, he must be able to analyze Demand, supply, profit maximization strategies, familiar with pricing theories, and the basic economic principle used in finance is the principle of cost-return margin analysis.
This principle implies that all financial decisions are made only when the expected benefits exceed the expected costs, and finance plays an important role in stimulating growth.
However, a number of distortions that accompanied this development often led to opposite results for this supposed role and had dire economic effects.
In this context, Islamic finance emerged as a model that includes a deeper understanding of the basic relationship between the financial sector and the real economy and as a framework.
An alternative better able to carry out major and vital tasks in achieving comprehensive development and increasing the capacity of the facility .
A financing facility that supports the facility’s ability to increase its production capacity and support its financial position so that it becomes more able to find a stable position for it in the competitive market with its ability to continuously develop.