Business finance is a term referring to the allocation of financial resources for optimal results and for maximization of wealth of an enterprise. This involves capital budgeting, acquisition of funds and management of funds.

Finance is considered an art and science of allocating financial resources. It is a science for it involves computation which can help in finding the best move particularly in investment decision. It is an art for it involves financial management skills and human efforts for the maximization of financial resources of an enterprise.

Funding, borrowing, lending and investing are financial activities that a business can undertake for its survival, continued operation and success.

The success as well as failure of an enterprise can be measured in monetary terms through the creation of financial statements such as balance sheet, income statement, statement of cash flows and other statements with monetary characteristics. If the assets, liabilities, revenues and expenses are properly allocated, it may result to gain. This can be seen in the financial statement where a positive net profit can mean success in the management of financial resources for use in expenditures to generate revenues. Moreover, the proper allocation of cash can be seen on the statement of cash flows. Cash is the foremost account title entry in a balance sheet. It is also among the greatest factors for the success and failure of a business.

The proper allocation of financial resources is a responsibility of financial managers and chief financial officer of a corporation or medium and small enterprises. Money, as they say, is the lifeblood of a business. In a business or corporation, the finance manager or the personnel in the finance department is tasked to provide the financial resources for funding business activities. The question is where do companies obtain the financial resources to fund the activities of an enterprise and for business to function.

There are various sources to obtain financial resources. In many micro and small enterprises, the funding of business managers, who are at the same time owners, is sourced from their own savings. Thus, proprietors are savers, investors and users of financial resources. They save money for future investment which has been materialized by creating their businesses. The saved money can then be used to obtain assets and to build capital structure. In proprietorship, capital is called owner’s equity.

Many individuals who are into business can obtain financial support from banks, lending companies, credit unions and investment companies. Although sole proprietors can obtain loans and borrowing terms from banks and savings and loans association, it would require him to place collaterals so he can obtain secured loans at lower interest rate. Moreover, the credit rating of an individual business owner can qualify him for a loan grant.

When a feasible business project that would require large amounts of investment to financially back the cost and expenses is planned, many individuals would consolidate their resources and even their industrial capabilities and management skills to operate and attain profits in business venture. Individuals or entities may form partnerships or corporations.

In partnership, one or more individuals, usually up to five individuals make an agreement to contribute either resources or capabilities or both for the creation of a business enterprise. The profits as well as the losses are distributed on each partner according to his contributions or to agreed terms.

Partners and individuals may form a corporation if the business venture may involve a business project that would require big investment or more than one business. In corporation, the funding of the business activity can be obtained by issuing stocks to the incorporators and shareholders. Shareholders or stockholders can contribute cash, property and labor to the corporation; in turn they can be entitled to ownerships of stocks.  Shareholders can be individuals, partnership organizations, investment capitalists and financial institutions.

Partnerships and corporations can obtain funding from their earnings which can be circulated for use their business activities. They can also obtain loans from financial institutions when a certain business project that proves to be feasible requires big investment.  In the case of public corporations, funding can be made through selling of shares of stocks to the public through stock exchange.