Introduction To Private Financing

1. Introduction To Private Financing

3. What is private financing?To understand the definition of private financing it is pertinent to start by mentioning what finance in general is. In this sense, this subject is responsible for the correct administration of the private investment of an organization. Now, there are different types of deepening or finance depending on the area in which they are required. Given this, there are various specializations of finance such as personal, public, private, corporate, among others. However, although they all require different knowledge for their applications at the same time they are also complementary.The concept of private investment indicates that it is a discipline focused on the management of money and capital of people and/or private companies.

5. According to other authors, private investment can also be explained as the knowledge required to manage privately owned financial resources, that is, to manage the money and capital of companies and/or people that do not belong to the state. Additionally, the importance of private finance lies in the need to know how to effectively and efficiently manage the investment and/or financing needs of the members who belong to the private sector.To close with this introduction to private finance, it is necessary to point out in the same way, certain particularities on this matter. That is why, below, a list with the 4 main characteristics of private finance will be exposed:

7. •    The objective of private finance is profit, that is, to increase the wealth and economic value of investors or private companies.•    Private finances are used to manage the financial resources of companies and private persons of a government.•    They are based on maximizing income and profits as well as minimizing costs and expenses.•    They do not seek comfort but rather the efficiency of financial resources to obtain the highest profitability.Differences between public finance and private financePrivate financing and public finance correspond to one of the most common ways of classifying this matter. Although all branches of finance are complementary, it could be classified that public finance and private finance have great differences between them that even make them seem like antonyms. It is for this reason, that below, we present a list of the main differences between public and private finance:

9. The objective of public finance is the welfare of a state, while private finance has the purpose of seeking profit for organizations and private persons.Public finance has a macroeconomic impact, that is, it handles finance from a perspective that includes several factors such as all the people, goods, or companies in a country. Private finance has a micro economic impact, that is, it handles finance focused on an individual organization.In private finance, the maximization of profits is sought through the optimization of investments, expenses, and costs. Public finance cannot always minimize its expenses or costs because its intention is social welfare.

11. Private finance is based on the application of any necessary measure to maximize the profitability of a company or private person. Instead, public finance is based on the application of laws and regulations based on the public policies of a government. For private finance, it is easier to carry and present the results through the financial statements. In public finance it is much more complicated to issue financial reports due to its large volume.In summary, the applications and purposes of public and private financing are very different. The first of them, what they are looking for is the management of public financial resources to achieve social welfare. Instead, the second is dedicated to maximizing the wealth and profitability of organizations and private individuals.