Small Business Finance – How to Avoid Sneaky Business Investments

Today, more people are faring well in their efforts to build small businesses. Many are creating incomes that support their desired lifestyle of more freedom and more fun. Amidst top line sales growth, entrepreneurs are still missing the mark when it comes to investment choices to grow the bottom line. The following tips will help when deciding how to use cash flow for investing.

Steer Clear of Emotional Spending

To protect yourself from getting caught up in investing hype, keep a level head throughout the process. Never weigh your final decision on what finances will be like once the investment goes through. Instead, take into account questions like: What will the investment produce? Do the numbers show that it is a solid opportunity? Is it in line with my values and goals? Usually if it sounds too good to be true, it is.

Be Patient on the Road to Riches

Being impatient in growing your money can make you a prime candidate for get rich schemes. Instead learn to separate the good from the bad investment opportunities before you put in the work, time, and money. Be willing to accept the fact that most success stories are not made overnight. You have to be willing to put in the work in order to get the harvest that you desire.

Get the Right Information

Another mistake that will impact financial returns is not having the right information to make good decisions. Becoming an informed investor is key to success. Do the research and gather the facts. Don’t just rely on the recommendation of a friend or associate.

Ask the Pros

The profits that you earn and save represent the effort that you put into creating income so use them wisely. Have standards for every investment and stick to markets that you are familiar with. For opportunities outside your expertise get wise counsel. You’ll be better equipped to make the best decisions possible with expert financial advice.

Identify False Claims

Sometimes no matter how much you evaluate opportunities and feel that the deal is right, the reality is there will always be some type of risk associated with an expected return. In these cases, designate an amount of cash that you are willing to invest and the level of risk that you are willing to assume. Plan for investment alternatives so that if you miss the mark, you can rebound. Your job as a wise money manager is to know your limits and stay to them within reason.

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Small Business Finance – How To Understand Expenses On The Income Statement

Expenses like income are treated differently depending on your method of accounting (cash or accrual). Cash accounting says a cost is “expensed” when you write the check to pay for it. Accrual accounting expenses the cost when the transaction occurs whether or not money is exchanged, e.g. a supplier may give you 30 days to pay your bill or you may pay your payroll/sales taxes monthly. Accrual accounting attempts to keep expenses matched up with the sale that generated it. Bills that are paid in a lump sum for the year can be accrued (spread out) each month; e.g. unemployment insurance is paid in lump sums which throws off your P&L because of the large payment.

A solution is to record the payment to the Pre-paid Expenses account within Current Assets on the Balance Sheet. You can then divide the amount by the number of months paid and then each month reduce the Pre-Paid Expenses by the smaller monthly payment and record it in the Unemployment Insurance account on your P&L.

Most of your expenses come from your checkbook register but there is a couple you will want to watch out for.

The principle portion of your loans and credit cards that you pay on your bill are not expenses. The principle portion paid should go to the liability account on the balance sheet for the loan. The interest portion of the bill is an expense. You need to look at the bill and split out the two portions.

Items that are purchased in the $500+ range (start ups and businesses with sales less than $300,000) are considered investments in the business and should be depreciated over an IRS predetermined time span. This is where tax law and Generally Accepted Accounting Principles are applied. Larger businesses are able to expense bigger ticket items. A small business puts these $500+ purchases on their balance sheet under long term assets.

Don’t worry about recording depreciation monthly unless your accountant has given you a schedule. Depreciation becomes a non-cash expense and accounts for the items you put on the balance sheet above $500 earlier.

Something to watch out for with depreciation is that the new tax laws have accelerated the ability to depreciated your assets, a good thing for lowering taxes but it often leaves a small business looking like it is not re-investing in itself. Ask your accountant to run the depreciation schedule two ways, one for taxes using the acceptable accelerated depreciation and the second way using the straight line depreciation based upon the lifespan of the asset for your business books. Why is this important? Banks run ratios that use assets to determine bank ability. As for you, it will give you a better idea of when to re-invest in furniture, fixtures, and equipment.

The most difficult thing about using P&Ls is consistent coding of expenses into their appropriate accounts. If you are unsure about which accounts to use, start with the ones on the tax return you will be using; e.g. schedule C for sole proprietors.

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Private Investors and Small Business Financing

To most people the only source of loans are banks and credit unions. However the finance world has many more players than that. Real estate investors have long used private mortgage investors as a way of buying real estate. Small businesses are now learning they can also use private investors to secure the funds they need to expand their businesses.

Private investors are individuals who are willing to lend their money to other people. In return the private lender receives a higher interest rate than they would get if they just put their money in the bank. Every private lender has their own lending criteria, which is often less strenuous than the red tape of a bank. I don’t meant to imply that getting a private loan is easy or guaranteed, rather just that the terms and conditions of a private loan are far more flexible because you only have to convince one person of the merits of your business proposition.

Make sure the business deal is a good one. Don’t waste your time or theirs by approaching them without a business plan or having done your due diligence. You often only have one shot to impress a private investor so don’t go into the meeting unprepared. Be confident but take any critique they offer to heart. They may help you by giving you solid insight into why you should not go forward with the plan you presented them or at least show you where your plan is weak. Listen carefully and take notes on what is said if the person declines to invest. You can tweak your business plan for the next potential investor. Or maybe the investor will say that you should fix the plan and come see them again.

Most private investors are savvy business people themselves and will understand a good business transaction when they see it. They will also be able to see through any scam someone may try to pull. Private lenders are not going to invest in a bad deal. If your business idea has merit then chances are the private lender will discuss terms with you. You are not obligated to take the terms of their loan anymore than the lender is obligated to fund the loan. Negotiate the terms to see if you can get a lower interest rate if you think it is too high. Don’t be afraid to ask for a lower interest rate or a longer period to repay.

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Small Business Financing – Case Study

Generally, borrowing funds from alternative debt financing sources is more expensive than taking out a traditional bank loan. However, many times companies either do not qualify for a traditional bank loan or credit line or must pay very high interest rates, include a co-signer/co-borrower, and/or attach communal assets. In that case, these alternative sources are excellent financing sources. Remember, banks determine the interest rate charged based on risk. The highest credit grade corporate customers are charged prime. All other businesses are charged prime + a risk factor. If a bank will not provide financing, the perceived associated risk is higher. These alternative funding sources mitigate their risks by specializing in a particular industry or asset class and compensate for this risk by charging higher fees and/or interest rates.

Example- SBA loan.

A data housing firm, Acme Technologies, made the decision to spin off its data management operations in preparation for its strategic acquisition by a larger corporation. The data management division had largely gone unnoticed despite its successful management by the division’s management. Needing to recoup some value from the division, which Acme’s CFO suspected might be terminated by Acme’s acquirer, Acme’s CFO made the offer to sell the business to the division’s management.

Although the division’s management team was skilled in a number of functional areas including sales, operations, and cash management, they had no experience handling complex financial transactions. They needed guidance so they used their network to find an advisor. They approached a U.S. Department of Commerce-sponsored Minority Business Enterprise Center (MBEC) located at a renowned university for assistance. The MBEC assigned a business advisor to help them.

The business advisor advised the management team to create a company to buy the assets of their employer. She then found a lawyer that completed their incorporation documents and successfully registered the company within three business days. Next, she spent hours requesting and compiling documentation to create an Executive Summary, pro-forma financials, and management team resumes to present to banks and direct lenders. Finally, she used her relationships with financial institutions to locate three entities that financed acquisitions and worked rapidly.

The CFO initially gave management six weeks from the time the offer was made to complete the transaction. The business advisor pushed back in conversations with the CFO and wrangled an extension. Several issues arose which the business advisor worked through quickly with the management team.

Two institutions, one direct lender and one community bank, emerged as the front runners. Both were highly responsive and flexible and recommended the use of an SBA loan. The community bank met face-to-face with the management team and championed the other banking functions it could provide, along with the long-term benefits of working with them. Subsequently, the management team opted to obtain financing from the bank.

Five weeks after meeting with the business advisor, the community bank provided a Letter of Commitment (LOC) to finance the acquisition. Three weeks after obtaining the LOC, the management team closed on the financing and the purchase of the division and began operating under the new company name, Acton Technologies.

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Merchant Cash Advance – An Alternative To Small Business Financing

Generally, small businesses look for different sources of financing and sometimes there are chances that they might be rejected of a bank loan. In such a case, the merchant cash advance can be the great alternative to them. If the business is in immediate need for cash and if there is a cash flow problem, this can be the great alternative to them. Even though, some years ago, banks were somewhat liberal, after the recession, credit has gotten tighter. Recently, the banks, irrespective of whether they are small or large, are recommended to increase their lending to small businesses for stimulating the economy and to speed up their recovery process. Do you know, how a merchant cash advance works? Let us find here:

When a company gets a merchant cash advance, the trade is something connected with the procurement and selling of future credit card income. Here, no regular fixed payments will be required by the company. A certain percentage of money from the credit card sales is collected on a daily basis by the lender. The collection will continue until the lender gets back the money they have given along with the premium. Generally, the financier will try to collect the advance money within a year.

One important thing that attracts companies towards this option is that, when they have a slow sales, they will be making a lower level of payment as their credit card income will be lower during this period. Another feature is that there is no due date pressure for the borrowers. It can be paid off when enough credit card sales are made and also no collateral security is needed to get this type of finance.

Actually, it is not a loan and it is just an advance of money against the future credit card sales. Attractive merchant cash advance rates are provided by some financing companies for helping out small businesses, who can pay off the money when their credit card sales increases. They provide this type of financing under different packages for smaller businesses to select from. Some of them are offered at very low rates like 1.25-1.29 and even at the rate of 1.39 and these rates depend on the package selected by the small business owners.

So, select a company that offers attractive merchant cash advance rates and enjoy a considerable return from the proceeds. When you are in immediate need of some cash, this can be a great alternative.

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Small Business Financing – A Useful Tool in More Ways Than One

Great. I found a business that I am interested in buying. Now where am i supposed to come up with all of the money?

For many people out there who are considering acquiring a pre-existing business, the most obvious obstacle which they must overcome is where to obtain the funds for the purchase. Faced with borrowing anywhere from tens of thousands of dollars to a couple of million dollars, many potential buyers find the task all too daunting. Understandably, these people, who oftentimes are making their first foray into the world of small to mid-sized business ownership, do not believe that they will qualify for a loan.

In fact, nothing could be further from the truth.

Most likely, potential purchasers will be seeking a Small Business Administration (SBA) Loan. And the best part about such a loan is that – unlike when a person applies for a home mortgage – very little of the lender’s qualification criteria have to do with the actual borrower. Instead, the lender is far more concerned with the collateral – in this case, the business – and its ability to generate enough income to enable the borrower to successfully repay the loan.

Thus, as you look around, you will find that many businesses for sale are pre-approved for SBA financing. And this can be a tool utilized by you or your business broker to determine if, in fact, the business that you wish to purchase is a viable one. In short, a business which a bank deems worthy of an SBA loan (considering, of course, that the business fits the primary SBA criteria) is in most cases a safer and better buy than one that cannot qualify for said financing.

One of the strongest products in the market today is the SBA 7(a) Loan Program. This loan can be used for nearly any business purpose, including:

Commercial real estate purchase or construction
Business acquisition
Franchise financing
Machinery and equipment purchase
Working capital and inventory
Or a combination of purposes.

The program offers up to 90 percent financing. So, with as little as 10 percent down, purchasing a building is made easier and buyers can keep cash in the business.

The long repayment terms of up to 25 years provide lower monthly payments, improve cash flow, and make qualifying easier. And there are no prepayment fees on loans with terms less than 15 years.

The program does not carry any balloon payments. The loan is fully amortized so there is no need to worry about refinancing.

The loan amounts offered can be as high as $2 million.

And competitive variable or fixed rates enable clients to choose the rate that works best.

The Firm for which I work, Ridge Partners, has longstanding relationships with leading lenders in the SBA and Commercial Real Estate financing industries. Members of the Firm have some of the strongest financing backgrounds in the industry, and are well-schooled at arranging loans for clients. This works not only to the advantage of our buyers, but also to that of our sellers.

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How to Make Money Online

The internet has opened new and exciting ways of generating money online. Moreover, you don’t need any special skills to become successful in this business. Many people start web based businesses to raise extra money for beating the hard economic times we live in. It’s possible to earn full time salary when you find a good online job.

Web blogging is a fast and safe way of making extra money, all you need to do is register it to a monetary program so as to make instant money. Common ways of making your blog generate money are through selling subsidiary adverts, signing for Google Adsense and trade of personal merchandise. Again, ensure that the niche area selected is profitable, if you’re keen on making extra money online then there is a lot to gain.

Another alternative is signing up for affiliate programs. Take time to think about the product you wish to promote plus amount of traffic expected. One can only make cash when there’s massive visitor traffic, since this in many cases generates brand exposure thus higher sales volume. You may also sign up for relevant CPA networks within your area, but you still be cautious of money making deals which are too good to be true. They only promise things that may be hard for them to deliver.

Online Marketing may also be profitable if you play your games right, one may sell his products directly to customers and get instant profits. There are websites which are absolutely free to open and have unrestricted servers. You can start one today at no cost at all but still generate good income.

Earning cash online can be a walk in the park provided you play your cards right. One can start up a new online newsletter to attract new visitors. It’s been noted as one of the simplest ways of generating extra money, and all that you have to do is generating traffic by developing relevant back links. With the newsletter, one can develop a definite list of characters who may be more interested in that subject. By remaining consistent with your targeted readers, it’s possible to build enough user trust and ultimately generate massive returns.

Selling of advert space is another way of making finances online. If your site is lucky enough to have grand traffic levels, then people may contact you to display their wares. One may offer classified ads, simple banners or holistic ads for some easy additional income. One may also host other sites directly on their official web-space on a monthly rate; this is quite a simple process provided the entrepreneur has a good business plan.

Moreover, being an official joint venture dealer is another means of making quality returns within the shortest time possible. In such an arrangement, you would get something small for every affiliate product that’s sold under your website’s name. In normal occasions, one get 10% the value of product that’s been sold, but this should well be discussed with the product’s owner to avoid future tussles.

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Guide to Online Debt Consolidation

Online debt consolidation programs help individuals to research, apply and take part in debt reduction programs. The consumer can manage the financing of debts at the click of a mouse. With the problem of excessive debt growing on today, online debt consolidation programs are becoming easy and beneficial.

An online debt consolidation program can allow a consumer to get a loan that will combine, or cover, all of the balances of their unsecured debt. This online debt consolidation program will offer the consumer a loan, plus additional help in getting their debt consolidated. Once debt is consolidated with an online debt consolidation program, then the consumer can begin to make just one payment once a month, on the entire debt balance. The interest rate is generally much lower than the interest rates found in credit card agreements, so online debt consolidation programs can save monthly payments also.

The online debt consolidation programs enables to easily secure and manage the account. With the Internet, times and finances have changed, and now consumers can manage their finances online, without going to the bank, filling out documents and saves on explaining problems. With online debt consolidation programs, consumers can get control of their debt, and do it from the convenience of their own homes.

A consumer need only begin today in researching online debt consolidation programs over the Internet. There are hundreds of companies that offer online debt consolidation programs and these programs can be listed on websites that offer general information about debt with links to the site, or a consumer can simply browse for home pages of online debt consolidation programs. There are different option included with different programs, so be sure and compare before determining the right program for you and your needs.

Consumers are encouraged to be careful when searching or researching lending companies that offer online debt consolidation programs. While an online debt consolidation program can be very beneficial, and most programs offer good and honest help, there is fraud throughout the industry today. Ask for references and also be sure to read all documentation before entering into a contractual agreement with an online debt consolidation company.

Many fraudulent sites have come up which charge excessive interest rates for even smallest of loans. These also charge application fees whereas one should never pay any fees to apply, as it should be free of cost. These also charge excessive loan fees and hidden charges. There is almost no help or customer service from such scammers.

Before applying online for a debt consolidation loan, one should make sure that the website is well organized, has helpful resources, has a short application form, no application fees, no obligation, no hidden charges and no bad credit.

Consumers have begun to see the potential of online debt consolidation services and are now using them to the maximum. The company gathers all the monthly bills and payments and offers you some quotes online. Compared to a bank or any other financial institution, where one has to show a spotless record and a large amount of paper work, here one gets results in a matter of minutes.

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Find The Right Online Automobile Loans

Let us assume that you have convinced yourself that you need a new car. Let us then assume that you have gone through the magazines, asked your friends, and gathered info online to help you make a purchase. Let us also assume that you have finally found what type of car you want. After all that, you then realize you do not quite have the money to cover the cost of the new car. In such a situation, the fastest way to solve the problem would be to apply for online automobile loans. Keeping that in mind, it is then in your best interest to know how to find the right online automobile loans company for your needs.

When searching for a good deal on online automobile loans, you should first take into account just how much money you can afford to pay off a vehicle loan in the long term. Loans can take years to pay off and the way that different companies lump the interest vary just as much. It is wise to take such thoughts into mind when you consider the loan. If you don’t think you would be willing to pay off a loan for a certain amount of time, try and look for one that won’t take that long, even if it causes a bigger hit on your bank account. Also, you might not be comfortable with paying off a large chunk of the interest at the beginning or at the end of the loan period, so be sure to avoid the organizations that do that.

Speaking of interest rates, the main factor in determining what online automobile loans fit your situation would have to be the interest rates. An interest rate, which is less than usual, is ideal if you are purchasing a car that is not all that expensive, so you don’t feel ripped off. However, what you should check before negotiating would be your own credit rating. It is perfectly logical for companies to quote you a higher interest rate if your credit rating is not very good. The lending organization might agree to the loan you are asking for but they may not be very comfortable about it if you do have a history of bad debts and late payments. If you have a good credit rating, the group lending you the money for your car would be much more willing to provide you with a lower interest rate, since they feel confident that you can pay their terms on time.

Naturally, since you would be asking for, essentially, someone else’s money, you have to provide some sort of guarantee or collateral. While risky, the most effective collateral that you can choose to offer is your home, if you happen to own one. A loan based on home equity can make almost any company that finances online automobile loans agree to lending you money, even if your credit rating is less than perfect. However, if you do not have a home or are still paying off the one you have, there are other forms of collateral that an organization will accept. You just have to make sure it is a highly valued asset, something that they would think you would not want to lose.

With the aforementioned reminders, you should have no trouble finding the right company for your online automobile loans. As with anything else, just be careful and beware of something that seems too good to be true, because online, it usually is. Lenders of online automobile loans are varied and numerous, which means that each one of them will be competing with the rest for your business. That situation is a good thing because it means more options for you to choose from and, ultimately, better terms.

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Bank Accounts Online

In these modern days of online banking, a trip to the local branch of your bank is no longer necessary in order to sort out your finances. The internet has revolutionised the world of banking and now more than 15 million people in the United Kingdom alone choosing to carry out their banking online.

There are a large number of different financial transactions that can be carried out online, from payments, balance checks and transfers to even applying for a credit card, loan or insurance.

There are many benefits to customers who choose to bank online. Bank accounts can be checked anywhere in the world with internet access so you can keep on top of things from home and afar.

The ability to check your balance and view statements online makes it easier to keep your finances in control and the information is much timelier in comparison to the traditional monthly paper statements. Having more than one bank account set up for online banking also means you have easy access and control over all of your accounts, making life just that little bit easier.

If you like to keep a paper trail of your finances you can usually download or print your statements. Most paper free banking services store documents securely online for a specified time period so it is possible to check your banking documentation at a later date if need be.

Another benefit of managing your finances online is the ease with which you can transfer funds from one account to another. You might want to move money between your current account and savings account, a process that can be easily completed at the mere touch of a button.

Online banking is not just for computer geniuses because the processes involved are designed to be user friendly and accessible to anyone with basic computer knowledge. Most banks will provide an online demonstration to help you along the way and help is never far away with dedicated online support teams to answer any queries you may have.

If you feel unsure about the security of online banking then you can stop worrying now because your banking information is encrypted and therefore protected. Many banks tend to offer an online guarantee against fraud so you can rest safe in the knowledge that your online transactions are highly secure.

The recent decline in use of cheque books and increasingly popularity in online banking demonstrates that the world is adapting to the opportunities offered by banking via the internet.

Online banking really does put you in control of your finances so whether you’re thinking of having an online bank account, savings account or credit card, the possibilities are worth investigating and you may be a few clicks away from a more streamlined and responsive solution to your all of your banking needs.

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