Finance: The Blood Of Economic Activities

Finance and economic activity

Finance is generally considered to be the “blood” of economic activity. Not only is the economy not possible without the circulation of money, but if it stagnates, it will cause great turmoil in society. As a result, in every country, nations used to make a number of arrangements to control most of their financial activities. Even in the latter half of the 20th century, such a system did not change, and governments prepared various laws to limit the activities of financial institutions.

The financial big bang started in the late 1990s
So what about your current financial business? First of all, it’s a big change from 20 years ago. Financial institutions have gained great freedom regardless of the type of business due to the major reform of the financial system (Japanese version, Financial Big Bang) that has been gradually implemented since the end of the 1990s in line with the global trend of “financial liberalization”. The attitude of the country (administration) has also been replaced from “supervision” to “surveillance.”

Not only is the movement of funds free to move globally, but interest rates, fees, insurance premiums, etc. can now be freely decided by each company like ‘Singapore forex broker‘. The barriers that separate activities by business type are also lowered and banks can sell not only traditional products such as deposits and loans but also securities and insurance. It has also become possible for financial holding companies to operate financial groups. For this reason, major banks called Mega Bank have set up financial holding companies and have banks, trust banks, securities companies, leasing companies, asset management companies, consumer finance companies, etc. under their umbrella. Of course, finance is an important infrastructure that supports the world and national economies, so many efforts require notifications and permits. Still, I’m much freer than before.

“Finance” and “information” are very closely related. Most modern financial businesses are established by “rewriting information” without moving money. In other words, the financial industry can be said to be an industry that is established by handling vast amounts of information.  Banks and other financial institutions have been actively introducing computer systems over the past half-century, focusing on improving the speed, efficiency, and convenience of information processing. You can withdraw deposits at convenience stores without going to the bank, you can easily shop with your card, and you can buy and sell securities on your computer or smartphone because the “information rewriting” mechanism has evolved.

How has the financial business changed?

Next, let’s sort out what has changed in the field of financial business.

  • Efforts have been made to strengthen competitiveness, such as improving product and service capabilities and thoroughly reducing costs.
  • In addition to the awareness of being a public job that supports economic activities, the awareness of making oneself a “service industry” has increased.
  • Unprecedented initiatives such as market research and marketing have become more important.
  • In addition to the role of providing financial functions to support living and industry, expectations and roles as a device that actively produces profits have increased.
  • The financial industry is evolving into a globally competitive industry that produces enormous profits.
  • Being free means more responsibility, so in addition to increasing capital, governance and compliance are being strengthened.

Getting Funds for Your Business

Businesses have unique needs. Thus, don’t expect a one-size fits all financial solution. Both your vision and financial situation will have an impact on how it is going to shape your business in the future. Do you think that businesses such as school fees debt collection spruce up out of nowhere? The moment that you know how much funds you need for your start up, that is when you can totally find out how you would get it.

Self-Funding Your Business

Self-funding a business is otherwise called as bootstrapping. With self-funding, it allows you to leverage your financial resources as a way to support your business. Self-funding also comes in form of turning to friends and family for capital or even using your personal savings account or tapping to your 401k.

Through self-funding, you will be able to keep full control of your business. However, this also means that you take the risks all by yourself. You have to be careful not to overspend. At the same time, be extra careful if you opted to use portion or your entire retirement account. You may face penalties or expensive fees or even damage your ability to retire at an early age.

Seek Capital from Investors

Believe it or not, there are a lot of investors who are willing to give budding entrepreneurs the funds they need to start their business. They do this in form of a venture capital investment. This type of investment is usually provided in exchange of ownership share as well as active role in the firm.

Venture capital is different from conventional financing in many different ways like for instance, venture capital is focused primarily on:

  • High-growth businesses
  • Invests capital in exchange of equity than debt
  • Taking higher risks in return of bigger profits
  • Longer investment horizon compared to traditional financing

Nearly every venture capitalist wants to have a seat on board of directors at least. Thus, be ready to give up part of your ownership and control to have funding.

How to Get Venture Capital?

The only question left now is, how you could find such investors? Well, there is no assurance that you can get a venture capital but, the process normally follows certain steps which includes finding an investor, sharing your business plans, going through thorough review and work out with the terms. Now, assuming that everything is agreed by both parties, then comes the part you are waiting, investing.