Financing a small business can be most time consuming activity for a business owner. It can be the most important part of growing a business, but one must be careful not to give it time to consume the business. Finance is the relationship between cash, risk and value. Manage each well and you will have healthy finance mix for your business.
Produce a business plan and loan package that has a well developed strategic plan, which will relates to realistic and believable financials. One which cvv dumps just finance a business, a project, an expansion or an exchange, you must develop just what your finance needs are.
Finance your business from a position of strength. As a business owner you show your confidence in the business by investing up to 10 percent of your finance needs from your own coffers. Tenacious twenty to thirty percent of your cash needs can come from private investors or capital raising. Remember, sweat money is expected, but it is not a replacement for cash.
Depending on the valuation of your business and the risk involved, the private money component will require over a 25 to forty percent money position in your company for three to five years. Giving up this money position in your company, yet maintaining clear majority ownership, will give you leverage in the remaining sixty percent of your finance needs.
Tenacious finance can come in the form of long term debt, short term working capital, equipment finance and inventory finance. By having a strong cash position in your company, a variety of lenders will be available to you. It is advisable to hire an experienced commercial loan broker to do the finance “shopping” for you and present you with a variety of options. It is important when it reaches this juncture that you obtain finance that fits your business needs and structures, instead of trying to force your structure into a financial instrument not ideally suited for your operations.
Having a strong cash position in your company, the additional debt financing will not put an excessive strain on your cash flow. Sixty percent debt is a healthy. Debt finance can come in the form of unsecured finance, such as short-term debt, personal credit line financing and long term debt. Unsecured debt is typically called cash flow finance and requires credit worthiness. Debt finance can also come in the form of secured or asset based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government guaranteed finance. A customized mix of unsecured and secured debt, designed specifically around your company’s financial needs, is the main advantage of having a strong cash position.
The bucks flow statement is an important financial in tracking the effects of certain types of finance. It is critical to have a firm handle on your monthly cash flow, along with the control and planning structure of a financial budget, to successfully plan and monitor your company’s finance.
Your finance plan is a result and part of your strategic planning process. You need to be careful in matching your cash needs with your cash goals. Using short term capital for long term growth and vice versa is a no-no. Violating the matching rule can bring about riskly levels in the interest, re-finance possibilities and operational independence. Some deviation from this age old rule is permissible. For instance, if you have a long term need for working capital, then the permanent capital need may be warranted. Another good finance strategy is having contingency capital on hand for freeing up your working capital needs and providing maximum flexibility. For example, you can use a personal credit line to get into an opportunity that quickly arises and then arrange for cheaper, better suited, long term finance subsequently, planning all of this straight up with a lender.
Unfortunately finance is not typically addressed until a company is in crisis. Plan ahead with an effective business plan and loan package. Money finance does not stress cash flow as debt can and provides lenders confidence to invest your company. Good financial structuring reduces the costs of capital and the finance risks. Consider using a business consultant, finance professional or loan broker to help you with your finance plan.
