There are two main types of financing for a business, debt or equity financing. Debt financing tends to be the type of financing you receive from a traditional bank loan and equity financing tends to be financing you receive from venture capital into your business from outside investors. The benefit of debt financing is that it is finite and you will pay down the debt over time to a zero sum balance without any further obligation to the lender. The down stroke to debt financing is that traditional lenders will take a hard look at your business including how long it has been in existence, income from operation, expenses and will require hard assets for collateral for the loan. Additionally, lenders will most certainly want you (and any other principals of the organization) to personally guarantee repayments of the loan. Another disadvantage of debt financing is that your organization will be burdened with some other type of regular payment (usually a monthly payment) depending on the terms and conditions of the financing and this can absorb critical cash flow, especially with small business.
The benefit of equity financing or venture capital is that you will be receiving money in exchange for equity in your business in the form of stock or some other form of equity like percentage of income or gross/net sales. A primary benefit of this type of financing is that typically there is no monthly payment requirement to investors. Instead, you are giving up ownership interest, most often, permanently.
Traditional lenders, banks for example, will look at your business much differently than venture capitalist. Bankers want a zero-risk or near-zero risk position when they provide financing and will rely almost completely on the operating economics of the business with little regard for “potential future growth”. They want to see strong cash flow backed up by hard assets before they do a deal–the ingredients that most small business lack or they wouldn’t be seeking financing, right? Venture capitalist, on the other hand, tend to consider the management team and the potential future growth of the business more heavily than actual operating numbers, especially for small business with large potential but few sales and little or no operating history. Although these two lender types vary in their approach to analyzing a business for funding, you can be sure that careful scrutiny of you business will be conducted…
Besides the actual operating economics and pro forma analysis, both types of lenders will look closely at two particular documents: 1. Your business plan. 2. Your bank or loan request package. These two documents, if assembled correctly, can make the difference between success and failure when dealing with either lender type.
There are plenty of free SBA related materials that tell you how to create blue-chip, boiler plate business plans but they tend to be written for perfect businesses and not the average Joe who is less than picture perfect. If you are seeking some type of financing for your business I strongly suggest that you visit our site and check out our business e-books. We have several that cover a variety of topics and there are specifically two that will be a real treasure for you to own. One is called Power Planning (a powerful report on writing a wide variety of business plans) and How To Raise Money For You Business (teaches you how to assemble professional loan requests packages). They are priced at $5 each and can be worth millions in the hands of the right person. I am not trying to hype product, I am simply giving you a heads up.
The secrets to getting financing from either type of lender is a closely held secret by financial and business brokers for a number of reasons. Chief among them is it forces people like you to do business with them and they earn commissions. The SBA materials, while good, do not have the street savvy to get the job done in most cases. The proof is in the pudding–what has the SBA ever done for you? The SBA is just another government back bureaucratic nightmare for most. We also have some links for venture capital firms in our business links area located on our site on the Smart Link Zone page–it’s all-free.
Give it some thought…. Your future may depend on it.
To your success! Copyright
Archive
For September, 2011
Financial accounting is providing information such as balance sheet, profit and loss accounts for taking financial decision. It could be produced in front of the external agencies like government department, income tax authorities, shareholders, as well as creditors who analyze the financial strengths and weaknesses of a company. Financial accounting services include only the monetary aspects of the business. In the company’s financial year end financial accounting is handled by certified accountants who produce two fundamental financial reports such as the balance sheet as well as the profit and loss statements.
• Experts to work for you
Finance department is the pillar for every firm. Therefore, financial accounting should be supervised by skilled professionals who help in enhancing overall progress of the business. In a business, financial understanding is essential to administer all types of expenses including sales and purchases, fixed and overhead expenses, etc. The expenses need to be noted down in the accounting ledger to verify the annual budget. These transactions are later revised at the financial year end, in order to check the cash flow of your business.
Financial accounting services keep a record of the financial transactions systematically for any business and make it easier to take correct financial judgments. Maintaining proper financial records, it is helpful in yearly transactions as well as report preparations.
• Outsource for efficient results
Outsource your financial services to the most consistent service provider who would ensure efficient running of your business, and help you to save your time and concentrate on other key issues of your business.
It is essential to have proficient financial accounting services work for you as a single mistake can cost heavily into major losses to your company. Having an experienced accounting service work for your firm is essential for efficient financial and accounting management. Providing the financial details of your organization and having skilled work force these companies are capable of preparing detailed reports such as balance sheets, as well as profit and loss account, etc.
• Choosing right company
Outsourcing Bookkeeping Services can work for all your tax and financial planning. It can also offer you with business tax planning providing individual attention. It is one of the most advancing accountancy firms providing business advice and tax consultancy based in India and its fundamental motive is to help its clients to provide with additional time to concentrate on its core business activities by reducing the load of financial planning issues. Visit: http://www.outsourcingbookkeepingservices.com to outsource your financial planning needs.