As the economy continues to face credit challenges, small businesses, especially new, start-up companies are finding it even more difficult to find the capital they need to take their ideas and concepts and turn them into viable businesses.
Private equity firms and angel groups are no longer actively seeking new investments. They are more concerned with preserving and protecting their current portfolios. Further, private investors, like your neighbor or local doctors, accounts, lawyers, are not investing in local companies as their investments and retirement portfolios (usually the main source of their investment capital) have taken such large hits that any new investments are just out of the question.
Bootstrapping, by far the greatest source of capital for new businesses, is drying up fast. Credit card issuers and backers are pulling programs, tightening approvals and reducing limits. Friends and families are struggling just to survive themselves and do not have the disposable income to investment in your company.
Taking loans from retirement accounts are nearly impossible today as the market values of these assets have drop so dramatically over the last two quarters. There just isn’t the value there to take a loan against.
SBA backed loans remain just a difficult and costly to obtain as always. These loans still need to be underwritten by traditional lenders who are not making any loans at all as well as be underwritten by the SBA who has followed the banks’ course in tightening standards.
So, what are new, small businesses to do?
A few suggestions are as follows:
First, start smaller and work your way up. Small scale operations mean smaller capital needs. Thus, the small amount of capital a new entrepreneur does have (savings, home equity, retirement plans) can be used to jump start a business if it is designed on a smaller scale.
Micro-Loans: Micro-loans are loans for small organizations or start-up companies that do not qualify for regular loan facilities. These loans usually range from $500 to $25,000 and take up to five weeks for approval and funding.
Personal Loans: There are still a few companies that make personal loans from $10,000 to $100,000 provided the borrower has excellent (and I mean excellent) credit and a demonstrated ability to make the loan payments.
Asset Based Facilities: If your business has some proven track record, even if it is just for a few months, and has generated some financial assets like accounts receivables or credit card receipts, you may qualify for capital against those assets.
Account Receivable Factoring can help speed up your cash flow while you wait for your customers to pay you. You can then access working capital that can be used to generate new business, cover current liabilities obligations, or make payroll. There are companies that will factor receivables as low as $200.
Included with Accounts Receivable Factoring is Purchase Order Financing. If your business has an order to be filled but does not have the money to complete the order (e.g. buy supplies or equipment or hire needed labor) Purchase Order financiers will provide the funds needed based on that order.
Business Cash Advances, while not really a loan, can provide working capital against FUTURE credit card sales. The funds can be use for any purpose and could provide the capital your business needs to get it through these troubled times.
Equipment: Do you own some equipment outright? If so, you can sale that equipment (including tools and machinery) to a leasing company. Then, lease the equipment back from the lessor. You get the cash you need now and still benefit from possible tax deductions of the lease payments and other costs.
Where there is a will, there is always a way. These may not be the cheapest financial products in the market but for most business owners and start-ups, these may be the only option.
When seeking capital in this market, try to keep in mind that it is only temporary. The markets will turn around and lending standard will loosen. So, what you seek now should only suffice enough to get your new, start-up business through this down period.
Copyright 2009 - BusinessMoneyToday.com
Joseph Lizio holds and MBA in Finance and Entrepreneurship and has a strong commercial lending background. In his current venture, Mr. Lizio is the founder of www.businessmoneytoday.com - a site designed to help business owners find and obtain capital to grow their businesses.
source: www.businessknowhow.com
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Senin, 16 Februari 2009
Selasa, 06 Januari 2009
Ten Tips for New Small Businesses by Diana Fitzpatrick, J.D. & Bethany K. Laurence, J.D (part 1)
Suggestions to help get your business off to a smooth start and keep it going for the long haul.
1. Save up as much money as possible before starting.
All too often, people go into business without any savings, exclusively using loan money from friends, banks, or the SBA. They except to be able to start paying the loans back right away with their profits. What these business owners don't realize is that it can take months or years to make a profit. And once a lender discovers a business isn't as profitable as expected, the lender is likely to call in the loan or refuse to renew it for another year. Often new business owners then have to take out home equity loans or use credit cards to pay off their loans (which puts their home and credit rating at risk). For more information, see Business Financing FAQ.
A better plan is to save up as much of the needed investment money as possible, including your living expenses for the first year, or even two. Odds are that your business won't be profitable for one to two years. Even if you get plenty of business coming your way -- and your customers pay you on time, which isn't always a sure thing -- you'll want to be able to invest most of that money back in the business for space, equipment, advertising, and insurance needs.
2. Start on a shoestring.
Think small. Don't rent premises if you can work somewhere else, and don't hire employees until you can keep them busy. (You can hire independent contractors or temps in the meantime.)
People who start their small business on the cheap, often in a garage, den, or some other scavenged space, and create their first goods or services with more sweat than cash, have the luxury of making their inevitable rookie mistakes on a small scale. And precisely because their early screw-ups don't bury them in debt, they are usually able to learn and recover from them. (Plus, running your business from home can save you tax dollars too -- see The Home-Office Tax Deduction for more information.)
3. Protect your personal assets.
When you go into business for yourself, you are usually personally liable for all judgments and debts that the business incurs. This includes business loans, taxes, money owed to suppliers and landlords, and any judgments against the business as a result of a lawsuit. If you don't protect yourself, a creditor can go after your personal assets, such as your car and your house, to pay for these debts.
While you can protect yourself against lawsuits by buying business liability insurance, this won't help you with business debts. If you will be running up big debts, consider forming a corporation or limited liability company (LLC). Just one person can form either of these types of businesses. For more information, see Choosing the Best Ownership Structure for Your Business.
4. Understand how -- and if -- you will make a profit.
You should be able to state in just a few sentences how your business plans to make a substantial profit. For starters, you need to know your costs: how much you'll spend purchasing inventory, paying the rent, compensating any employees, and covering what is likely to be a surprisingly long list of other costs. Then you can figure out exactly how much you need to sell each month, for how many dollars, to cover those expenses and have an adequate profit besides. These numbers are all you need to create a "break-even analysis." For more information, see Will My Business Make Money?
5. Make a business plan, no matter how short.
Understanding your profit numbers and creating a break-even analysis is the first step in making a business plan. For most small companies, the key portions of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection. (Projecting your cash flow is key and will make or break your company: Even if your business is getting plenty of work or selling its products, if you're not getting paid for 90-180 days, you're not going to survive unless you've planned for it.) With a cash flow spreadsheet in place, as well as a profit-and-loss forecast, you can tinker with your business idea and improve it before you start -- and continue to use them after you start.
Creating a business plan also allows you to determine what your projected start-up costs are (how much money you'll need to save) and what you marketing strategies are (how you'll reach customers to make sales). If you can't make the numbers work on paper, you won't be able to make them work in real life. For more information, see The Essentials of a Business Plan.
source :www.nolo.com/article.cfm
1. Save up as much money as possible before starting.
All too often, people go into business without any savings, exclusively using loan money from friends, banks, or the SBA. They except to be able to start paying the loans back right away with their profits. What these business owners don't realize is that it can take months or years to make a profit. And once a lender discovers a business isn't as profitable as expected, the lender is likely to call in the loan or refuse to renew it for another year. Often new business owners then have to take out home equity loans or use credit cards to pay off their loans (which puts their home and credit rating at risk). For more information, see Business Financing FAQ.
A better plan is to save up as much of the needed investment money as possible, including your living expenses for the first year, or even two. Odds are that your business won't be profitable for one to two years. Even if you get plenty of business coming your way -- and your customers pay you on time, which isn't always a sure thing -- you'll want to be able to invest most of that money back in the business for space, equipment, advertising, and insurance needs.
2. Start on a shoestring.
Think small. Don't rent premises if you can work somewhere else, and don't hire employees until you can keep them busy. (You can hire independent contractors or temps in the meantime.)
People who start their small business on the cheap, often in a garage, den, or some other scavenged space, and create their first goods or services with more sweat than cash, have the luxury of making their inevitable rookie mistakes on a small scale. And precisely because their early screw-ups don't bury them in debt, they are usually able to learn and recover from them. (Plus, running your business from home can save you tax dollars too -- see The Home-Office Tax Deduction for more information.)
3. Protect your personal assets.
When you go into business for yourself, you are usually personally liable for all judgments and debts that the business incurs. This includes business loans, taxes, money owed to suppliers and landlords, and any judgments against the business as a result of a lawsuit. If you don't protect yourself, a creditor can go after your personal assets, such as your car and your house, to pay for these debts.
While you can protect yourself against lawsuits by buying business liability insurance, this won't help you with business debts. If you will be running up big debts, consider forming a corporation or limited liability company (LLC). Just one person can form either of these types of businesses. For more information, see Choosing the Best Ownership Structure for Your Business.
4. Understand how -- and if -- you will make a profit.
You should be able to state in just a few sentences how your business plans to make a substantial profit. For starters, you need to know your costs: how much you'll spend purchasing inventory, paying the rent, compensating any employees, and covering what is likely to be a surprisingly long list of other costs. Then you can figure out exactly how much you need to sell each month, for how many dollars, to cover those expenses and have an adequate profit besides. These numbers are all you need to create a "break-even analysis." For more information, see Will My Business Make Money?
5. Make a business plan, no matter how short.
Understanding your profit numbers and creating a break-even analysis is the first step in making a business plan. For most small companies, the key portions of a business plan are the break-even analysis, a profit-and-loss forecast, and a cash flow projection. (Projecting your cash flow is key and will make or break your company: Even if your business is getting plenty of work or selling its products, if you're not getting paid for 90-180 days, you're not going to survive unless you've planned for it.) With a cash flow spreadsheet in place, as well as a profit-and-loss forecast, you can tinker with your business idea and improve it before you start -- and continue to use them after you start.
Creating a business plan also allows you to determine what your projected start-up costs are (how much money you'll need to save) and what you marketing strategies are (how you'll reach customers to make sales). If you can't make the numbers work on paper, you won't be able to make them work in real life. For more information, see The Essentials of a Business Plan.
source :www.nolo.com/article.cfm
Senin, 05 Januari 2009
Top ten tips to business survival
Statistics show that in the first quarter of 2006 the number of company liquidations rose by 17 per cent on the same period of the previous year. To improve your chances of survival, Bibby Financial Services is offering these basic business tips.
‘It is a sad fact of business life that some businesses will fail, and for those companies forced into liquidation in the first quarter of this year, this must be put down to experience,’ believes David Robertson, chief executive of Bibby Financial Services. ‘But, with the acumen, finance and drive to succeed, following some basic rules may dramatically improve a company’s chances of success.’
Bibby provides the following top ten tips:
• ‘Plan’ is a four-letter word – researching the market you are intending to enter is paramount. Be sure there is a demand for your services and identify who the competition is. Don’t forget to review your business plan and, if things have changed since you made it, ask yourself why.
• Pace yourself – budgeting is essential at all stages of the business lifecycle, but investing too much too soon may lead to a business becoming over-stretched.
• Credit where it’s due – negotiate longer credit terms with your suppliers but set shorter terms for your customers. Consider how early settlement or volume discounts could benefit your business.
• Lay out your own terms – establish and agree credit terms upfront. Ensure invoices are issued promptly, clearly displaying the conditions of the transaction such as “payment due”.
• Cash is king – cash is fundamental to any company and businesses must recognise the importance of generating cash and keeping it coming in. In the event of a cash flow blockage, explore alternative funding methods such as invoice finance which can release up to 85 per cent of the cash tied up in unpaid invoices.
• Streamline – look at ways in which internal processes can be carried out more efficiently and don’t be afraid to cut out wasteful tasks. Review your suppliers regularly to ensure their quotes are competitive and offer best value for money.
• Delegation’s what you need – by delegating time-consuming non essential tasks to other staff members, owners and manager will be freed to focus on the business' core activities such as generating new business.
• Ask the experts – seek external advice from an independent source such as an accountant, lawyer or business adviser. But remember to choose carefully – it is imperative that you select someone who appreciates your needs and understands which direction you want the business to go. Counsel from an outsider may also stop any rash decisions being made.
• Honesty is the best policy – be realistic. If things are not working out how you thought they would, address the reasons why this is happening and find a new approach.
• Roll with the punches – every business, at some stage or another, will experience a certain level of difficulty. Be decisive by tackling any problems head on and dealing with them promptly.
Comments
source :www.smallbusiness.co.uk
‘It is a sad fact of business life that some businesses will fail, and for those companies forced into liquidation in the first quarter of this year, this must be put down to experience,’ believes David Robertson, chief executive of Bibby Financial Services. ‘But, with the acumen, finance and drive to succeed, following some basic rules may dramatically improve a company’s chances of success.’
Bibby provides the following top ten tips:
• ‘Plan’ is a four-letter word – researching the market you are intending to enter is paramount. Be sure there is a demand for your services and identify who the competition is. Don’t forget to review your business plan and, if things have changed since you made it, ask yourself why.
• Pace yourself – budgeting is essential at all stages of the business lifecycle, but investing too much too soon may lead to a business becoming over-stretched.
• Credit where it’s due – negotiate longer credit terms with your suppliers but set shorter terms for your customers. Consider how early settlement or volume discounts could benefit your business.
• Lay out your own terms – establish and agree credit terms upfront. Ensure invoices are issued promptly, clearly displaying the conditions of the transaction such as “payment due”.
• Cash is king – cash is fundamental to any company and businesses must recognise the importance of generating cash and keeping it coming in. In the event of a cash flow blockage, explore alternative funding methods such as invoice finance which can release up to 85 per cent of the cash tied up in unpaid invoices.
• Streamline – look at ways in which internal processes can be carried out more efficiently and don’t be afraid to cut out wasteful tasks. Review your suppliers regularly to ensure their quotes are competitive and offer best value for money.
• Delegation’s what you need – by delegating time-consuming non essential tasks to other staff members, owners and manager will be freed to focus on the business' core activities such as generating new business.
• Ask the experts – seek external advice from an independent source such as an accountant, lawyer or business adviser. But remember to choose carefully – it is imperative that you select someone who appreciates your needs and understands which direction you want the business to go. Counsel from an outsider may also stop any rash decisions being made.
• Honesty is the best policy – be realistic. If things are not working out how you thought they would, address the reasons why this is happening and find a new approach.
• Roll with the punches – every business, at some stage or another, will experience a certain level of difficulty. Be decisive by tackling any problems head on and dealing with them promptly.
Comments
source :www.smallbusiness.co.uk
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