4 Major Types of Finance

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Can you manage your money easily? Finance does not only mean managing money, but it includes investing, borrowing, and saving. It has four major types: personal finance, corporate finance, public finance, debt finance, and Cash Flow Loans.

What is Finance?

It is a true statement that “finance has been present on earth in any form since humans’ existence.” Though its forms and shape change over time, using it always remained the same. Finance originates from the French word, and it means money management. In addition, it is the management of funds. It is the study of managing funds wisely and information of processes of the required funds. And during this pandemic alone people are getting good at managing their finance as Covid-19 increased peoples interest in Bitcoin which helped them gain more.

This post will provide you with detailed guide about the types of finance and their various components. 

1.  Public Finance

The first type of finance is public finance that is all about income and expenditure. It includes government finance, and it has a vast scope. In addition, it involves fund’s collection and distribution in various government activities that come under functions and duties of government.

Public finance can have three different subcategories.

Public Expenditure

Public expenditure is the government’s expense for its maintenance and welfare of society, the country’s economy, and the public’s well-being.

Public Revenues

It is the second subtype that involves public revenues, income, and receipts required by the government. In addition, it accumulates loans from the government. It includes income from revenue resources like fees, price, taxes, fines, penalties, etc.

Public Debt

This third category includes loans that offer a finance foundation on a promise to reply to the common public and charge interest in exchange.

2. Personal Finance

It includes all financial activities of an individual that may consist of mortgage planning, savings, budgeting, insurance, and retirement planning. If you create a better understanding of these terms, it will be helpful for you to control your budget and get financial success in the future.

In addition, it is easy to understand the financial position on creating good understanding by analyzing household cash flows and net worth. Net worth means the total of your income and expenses balance sheet calculates all assets and eliminates all liabilities from it.

3. Corporate Finance

Corporate finance is the activities that affect a corporation. In other words, it is a department in any company that deals with financial matters. Corporate finance aims to increase shareholder value. The duration can be both: long term and short term. It also offers multiple financial planning strategies.

4. Private Finance

Private finance plays the role of substitute for corporate finance. It assists companies by raising funds and protects monetary problems. Through this method, companies not listed on the securities exchange cannot gain finance in such markets.

5.  Invoice Finance

It is another type of finance that assists small businesses in maintaining their cash flow. It has two basic types. In this type where you need to use an invoice that you have distributed as security to gain a loan.

Many invoice finance providers charge drawdown fees and set interest rates. It can be helpful for you if you need payment on an urgent basis. You can benefit from this service, and it serves as a cash-based business.

6. Invoice Factoring

It is the condition of selling invoices to a third party at less cost and getting instant payment in return. If you are in need for an urgent payment, you can opt for this through this method and get some finance for your business to meet the uncertain business condition.

7. Cash Flow Loans

These are primarily short-term loans that assist you in maximizing the business opportunity to manage cash flow in massive amounts. It offers some benefits like it offers the faster application and requires less paper work. It also ensures complete transparency and repayment confirmation about the total amount.  There may not be a fixed interest rate and may include some changes in hidden fees. Remember to check before getting loan!

Conclusion

Finance is not a term that can be explained in some lines. In actuality, it is a broad term, and each country’s economy relies on it. From ordinary people to agencies, industries, and governments adopt different strategies to manage finance and benefit from it.

About Neel Achary 19148 Articles
Neel Achary is the editor of Business News This Week. He has been covering all the business stories, economy, and corporate stories.