A Loan according to Merriam Webster dictionary is; money lent at interest or omething lent usually for the borrower’s temporary use.

A loan is when you get hold of cash from a friend, bank in alternate for future reimbursement of the cash plus interest. 

Here’s how the loan process works; When someone needs money, they apply for loans from banks, companies, governments or other entities. The borrower may need to provide specific details, such as the reason for the loan, financial history and other information. The lender reviews the information, including the personal debt-to-income ratio (DTI) to determine if the loan can be repaid. Depending on the creditworthiness of the applicant, the lender rejects or approves the application.

Before we go ahead to talk more on loans and it’s advantages, let’s talk about types of LOANS

1: Secured Loans:

This type of loan requires an asset to secure the loan. If the borrower defaults on the loan, the lender has the right to take the collateral. However, secured loans are more volatile than unsecured loans because you may want to lose your collateral if you cannot clear the debt. You consequently think very carefully – and consider other picks – earlier than taking out a secured loan.

2: Unsecured Loans:

This kind of loan mean that the borrower does not have to provide assets as a guarantee. In a non-secure loan, the lender is very complete when evaluating the financial condition of the Borrower to be sure if they are capable of taking the loan. However, unsecured loans are more risky than fixed loans for lenders, you need a high credit score for approval.

Under these loans we have:

Mortgage loans

Small business loans

Student loans

Home equity loans etc.

Loans can be a good thing, but they can also mar you, one of the keys to financial success is knowing when a it is a good solution for your situation. If you cannot repay it within the specified term, then a loan is not a good idea. Either you want to promote growth, maintain day-to-day operations, acquire new equipment, smooth and support unbalanced cash flow, establish a reliable supply chain, or finance existing projects, exploring the benefits of borrowing can be the right decision.

Borrowing money allows you to support aspects of the business that you may not be able to pay. However, even if you are lucky enough to have enough capital, giving up savings can cause problems later in the development of your business and limit your ability to establish a reputable credit rating. So, instead of pre-buying goods and services, exploring the benefits of borrowing money allows you to split or postpone spending until later, and your goals are more affordable in the long run.

Finance and accounting are terms often used interchangeably. While both are concerned with managing an organization’s assets, each has a different scope and purpose. When it comes to assessing the financial health of your business or department and making strategic financial decisions, it’s important that you have at least some knowledge of these two areas.

What is Finance?

Finance refers to how a person or organization generates and uses capital – in other words, how a certain party manages their money. This typically includes activities such as investing, borrowing, lending, budgeting, and forecasting. The finance sector can be broken down to focus on specific types of stakeholders, including personal finance, corporate finance, and public finance. While these categories often cover a similar set of activities, each funding category has nuances that reflect the different regulations, considerations and concerns of individual citizens.

What is accounting?

On the other hand, accounting refers to the process of reporting and communicating financial information about an individual, business or organization. Rather than making strategic financial decisions, accountants are interested in taking an accurate snapshot of a party’s financial condition at any given time – a practice that leads to information on which financial activities are typically based. Typical activities related to accounting include recording transactions, collecting financial information, compiling reports, and analyzing and summarizing transactions. Results typically include detailed financial statements – including income statements, balance sheets, and cash flow statements – which are used to understand where the organization is at any given time.

CAREERS IN FINANCE

It is a broad field related to money management that covers everything from corporate finance to personal financial planning. Careers in finance may include jobs such as:

Investment banker

Financial broker

Financial manager or planner

Financial advisor

Financial analyst

CAREERS IN ACCOUNTING

They typically work with journal entries, bank reconciliation, invoicing, and similar processes involved in the day-to-day operations of a business. They can also create quarterly and annual financial reports, analyze profitability, manage debt, audit internal transactions and income statements. Careers in accounting include:

Financial reporting accountant

Auditor

Bookkeeper

Cost accounting manager

Accounts receivable clerk

Accounts payable clerk

Controller

Treasurer

Technical accounting manager

Tax accountant

In conclusion;

In all areas of business, accounting and finance are concerned that companies cannot survive in the long run without them. Imagine what the condition of a business would be if both were not there. There will be no record of transactions, no returns can be determined, there will be no basis for valuing stocks and investments, capital management is unthinkable, the risk coefficient will increase, cannot be compared, budgeting and cash analysis would not be possible, etc.

Financing a Business is not a walk in the park, and a business can’t survive without finance. Financing a business means providing funds for starting and maintaining it,  regardless of whether it’s a small or large business.

Ways to finance your business in Nigeria?

1: Bank Loans: Loaning from banks has been in existence for decades now, and it’s the first place businesses go to once they need funding. This option isn’t the best for small businesses, because it requires having collateral from you to secure the loan.

2: Government Grants: Lately, the federal government has been considerate of startups and small businesses. They are providing funds for businesses that can impact the economy, you don’t need to repay, but you’ll be monitored. There are several government grants in Nigeria, which include; Bank of Industry Grants of Agriculture etc.

3: Family and Friends: If you have a good business idea, you can write a well-detailed business plan and inform them. Explain to them how you intend to pay them back, and always fill them in on any challenges that might come up. Also,  if things hit the roof, communicate immediately. Lastly, don’t mismanage the finance because they are your friends and family, be trustworthy.

4: Strategic Partnership: Some people have funds to invest in a business, they don’t involve themselves in the day-to-day activities of the company. While some do, all you need is to sign a contract and have an agreement with this partner or co-founder. Choose a trustworthy partner.

5: Crowdfunding: This is simply raising funds for individuals from a lot of people. Crowdfunding isn’t done for business alone, health issues, tuition fees etc. If you’re using this option, you’re not repaying them because they are not investors.  There are many crowdfunding sites you can do this or through social media.

These are a few out of the options available to finance a business. You can choose any that is suitable for you, also note that before looking for ways to finance a business you should be sure of the nature of your business, the risks involved and the challenges you might face.