Reasons for Financing

Video Transcript

"This is financial advisor Patrick Munro discussing what are the reasons for finance. Well "Finance" as a term really means to draw in capitol for the benefit of the party. There are many times when individuals, they'll have an idea, or something that they want to do, but they don't have the available funds to do it. Therefore, what they need to do is finance the purchase or the idea. There are ways in which to do that, you can simply, if you're an individual, apply for the finance for the credit from an institution that has money if you don't have any, they'll give it to you if you're credit worthy and you're willing to pay a return to that that institution for the money and the usage of their money. That's a good reason for finance. Also companies which need money to grow have an equivalent need for finance and what they'll do is they'll issue shares in their company to draw in Investors who have money that want a return on their money. If you issue these shares and they're usually sold through brokerage firms in the form of stocks, mutual funds and bonds. Then the company, if they're successful in using the money that's given to them will grow into an even larger company. Therefore they'll declare a Dividend back to the Investor and the cycle repeats itself. However, if the company takes the money and squanders or has a bad arraignment with the money, then of course, the Investors who have risked their capitol will not have a return, and may in fact lose money. These are the general reasons for finance. This is Financial Adviser Patrick Munro discussing reasons for finance."