02 Mar / 2017
Deciding which financing option is bet for your business can be a challenge, especially if you don’t know quite what the different choices entail. The current top options are debt loans and equity financing, each of which has its own benefits and shortcomings. While each of them offers feasible opportunities for any business, it’s crucial to consider the differences involved, and assess the current and future needs of your business and yourself accordingly prior to making a commitment to either.
Debt loans are the traditional sort of loans which are used most commonly in the current economy. From housing to commercial interests, these loans have long dominated the world of lending and financing. This is for a good reason. These are the types of transactions which most banks and lenders specialize in. A set amount of money is given to a borrower after an examination of variables such as credit history and previous loans, and a repayment plan is worked out. Over the following months or years, the recipient of the loan repays in monthly payments with added interest. Debt loans can benefit companies which produce or sell goods on the market because business owners will know exactly what they’ll be receiving. This money can be spent on inventory or materials necessary to help the business move forward in the desired path. However, monthly payments regularly take working capital out of the business, leaving less cash for development later on.
Equity financing offers an experience with business startup that is almost the polar opposite of the other option. This process involves the business owner selling stock in the company to outside parties, who then own a portion of the business. This allows the development of the business to move forward without the owner having to worry about repaying monthly sums. The shareholders are entitled to a certain portion of the business’ profits, but repayments of large sums are rendered unnecessary. This frees up a company’s cash flow to encourage growth throughout, and provides flexibility so that profits can go where they are needed most. Furthermore, if the business flops, consequences are much lighter than if defaulting on a debt. However, selling too much of the business can make it hard to control, and so the sales of stocks are actually limited in some aspect. Equity financing is ideal for risky markets such as technology.
When it comes to deciding which course is the best, it really depends on your business itself and the products or services it provides. Assessing the needs of the business alongside what each option has to offer is important for success and growth.
02 Feb / 2017
Investing in a franchise is an exciting way to really get started in business. You get the benefit of the brand and advertising efforts of the parent company while being able to say you’re the boss. You have many different options for franchise financing. Although the parent company may have some avenues, it’s worth your time to make sure you’re getting a good deal by exploring all the avenues open to you. Here are three other choices for franchise financing.
Banks and credit unions in your community generally look favorably on franchises, because of the track record and preconceived business model. However, the loan process through a bank can be quite tedious and lengthy. It can take a long time to get a decision, but you may want to work with a local business yourself.
SBA 7a Loans
The Small Business Association acts as a guarantor for loans to small businesses. There are some requirements and regulations concerning these loans, but they are open to franchise financing. The paperwork can be lengthy, but the franchise parent company probably has the business model and paperwork to help the process go smoother. The SBA levels the playing field by helping small business owners get better rates and terms on their loan, even though they don’t have the financial power of a larger organization.
Many new types of lenders are in the market to help businesses get started and keep going. These businesses began after the market collapse that happened a few years ago, when it became more difficult for business owners to get a loan with a bank. Long-term and short-term loans are available, and many loans can be processed quickly. It’s worth your time to see what types of franchise financing are available to you to see where you can save money.
Although one percentage point of interest does not seem like a lot in the overall scheme of things, when you calculate the math long term, especially on a business loan, you could be talking tens of thousands of dollars over your lifetime. Friends and family may be willing to invest, but that opens the door to “silent” partners who may not really be silent if you seem to be struggling. Use the business options available to you to get your franchise financed and feel confident in what you’re doing. Take steps to financial freedom with the right partners who will help you succeed with the right resources.
12 Jan / 2017
As the face of American society changes, new types of franchises are going to surge in popularity. Many industries will likely be changing very rapidly over the next few decades. If you are just starting out on your franchising endeavor, looking into these opportunities could be very beneficial to your long-term success.
Parents today are becoming increasingly interested in sending their children to specialized private schools. They appreciate having options when choosing a school, including non-traditional schedules, teaching techniques and educational specialization. Opening private school franchises can be very personally rewarding in addition to being profitable because you have so many options to match your interests. Your school can focus on anything from engineering to dance to social justice and beyond. If you prefer to work less traditional hours, operating a driving school franchise or a test-prep center might be a better option for you.
Many teens and young adults today are becoming less interested in shopping in traditional big box stores and more interested in the development of a sharing economy. Adult clothing resale franchises are popping up in shopping centers all over the country, as are baby consignment stores. These types of stores are valuable to many young adults, who like the idea of recycling under-used items and having the option to get quick cash whenever they need it.
Because technology is changing faster today than ever before, many companies are having trouble keeping up with all of the repairs required to keep their businesses running smoothly. Rather than paying full-time staff to maintain their computer systems and mobile devices, many small businesses are now opting to hire an IT repair franchise on an as-needed basis. As computers, printers and robotics become more varied and prevalent in the business world, specialized repair teams will become more essential in nearly every industry.
Senior citizens currently make up over 14% of the American population and this number is projected to grow consistently over the next few decades. As the population ages, businesses that cater to the needs of older people are going to become more popular. These companies range from home health care to medical device rentals to completing household chores. Franchises that build and operate senior living facilities will also become more necessary as the older generation’s health declines.
As America’s population profile continues to shift over the next few decades, so will their spending tendencies. Technological innovation will replace many jobs that are common today with new methods and industries. Make sure you take these changes into consideration before committing to a long-term franchise agreement or making a large investment. You’ll be glad you did!
09 Dec / 2016
Yes, hard money loans are better than bank loans for numerous reasons, the primary one being that they are suited specifically for real estate investing, so it makes sense for an investor to fund his or her venture in this fashion. But this is only one reason why these types of loans are so appealing. There are plenty more.
When a real estate investor is in need of cash to finance a purchase, the benefit of having a short-term loan outweighs any bank’s long-term agreement. The purpose of real estate investing is to purchase a property and have it become profitable either by renting or renovating and selling it. Hard money loans are short-term loans, meaning they are paid back quickly and removed from the overall investment’s bottom line. This, in turn, helps the property turnover its anticipate profit in a shorter period of time without the lengthy payback and interest of a bank loan.
Short Approval Process
Banks not only spread out loan payments so they can accumulate more interest, they also take up to 30 to 45 days to approve a real estate investment loan, and many investors don’t have the luxury of waiting that long. Escrows themselves are as short as 30 days, and if the property is in foreclosure, which is optimal because the purchase price is usually a steal, the transaction must be in cash. Hard money loans provide money upfront in as little as a few days, so if the investor has a piece of property in mind, he or she can secure the cash for it right away.
No Credit, No Problem
Unlike traditional bank loans which require a solid credit standing and plenty of collateral to back it up, the hard money lender is going to use the property for sale to support the funding. If the borrower defaults on the loan, the investment property becomes the lender’s possession. This is a huge advantage over bank loans for those who are just getting into real estate investing or who have an unfavorable credit score. Lenders don’t look at the borrower; rather, they look at the property the loan will be purchasing.
Alongside these benefits, hard money loans can have flexible interest rates. In states where real estate investing and hard money lending is hot, the lenders compete for business by reducing loan interest rates. Big banks have plenty of business with or without commercial property lending, so this is just one more reason why hard money loan opportunities are better than walking into the bank.
When you are attempting to grow a small business, budgeting time and money effectively are both vital to success. One factor in this growth is how you move forward with hiring staff, and you may be wondering if hiring independent contractors is the better choice as opposed to bringing on traditional employees. There are pros and cons to each; however, building a solid team of contractors may help you fill project needs faster, give your workforce a greater flexibility and give you the freedom to grow your business instead of focusing solely on the management of your employees.
Hiring employees requires reams of paperwork, multiple interviews and the checking of references that may take weeks to complete. In the meantime, projects must be put on hold until you find someone qualified to fill them. If you need a project completed quickly, then hiring independent contractors is the better choice because they usually do not require a great deal of training and typically offer potential clients transparency when it comes to their experience and references. As a result, you will be able to fill positions faster with individuals who are already highly trained and experienced in areas such as social media management, web design and virtual assisting.
Having a flexible workforce allows you to grow your small business with greater ease because you can bring on or dismiss independent contractors as needed without having to worry about doling out severance pay or dealing with irate ex-employees you were forced to lay off. Contractors work on an as-needed basis, and when projects are complete, you can either shift them to other projects or release them until you need them again in the future. Many contractors who work independently are open to working for clients on a repeat basis, and this means you will have access to talented individuals when you need them instead of having to seek out new employees all the time. In fact, when you build a team of contractors that possess a variety of different talents, you can turn to it as you need work completed and potentially save a great deal of time and money.
While independent contractors can be a boon for you as a small business owner, it is important to remember that they may not be the best fit for every situation. As you put together a workforce, consider your needs for the present and goals for the future in order to make the best decision possible for your business.
Businesses of all kinds rely on equipment for effective daily operations. Sometimes when those machines break down, a business faces the loss of revenue. For many medical and healthcare facilities, malfunctioning equipment can mean potential lawsuits. For many businesses, older machinery might present a growing amount of inconvenience. Medical facilities, however, could be held legally and financially responsible if they continue to use obsolete equipment.
There are a number of possible benefits to leasing medical equipment. These include tax benefits, convenient and flexible financing, quick access to modern equipment, and the peace of mind that comes from knowing equipment will be cared for by the leasing company. If you are in charge of or own a healthcare facility, these benefits may have tempted you to try out a lease arrangement. How can you be sure that leasing is really a better choice than purchasing?
You may want to carefully consider the short-term and long-term costs of leasing versus purchasing. If you’re looking at making a purchase soon, you may find that saving up enough cash for that purchase (or even for the down payment) takes a long time and represents a difficult arrangement. Even if you are considering taking a loan to pay for the equipment, this can be a problem, especially for smaller businesses. A lease, on the other hand, typically requires little to no initial cash investment.
When you consider the long-term costs, you’ll want to estimate how long you believe the equipment will last and how much maintenance will cost. It’s possible that the purchase of some machines would make more sense than a lease. Consider adding up the monthly lease payments and comparing that to the ultimate purchase price along with maintenance and repair. If those repairs will be expensive, leasing may be the best option.
Finally, you can use a simple calculation to determine whether leasing or purchasing would be the best option. The first step is to determine how much gross revenue the practice will expect because of having the equipment. The next step is to subtract all related financing costs. Finally, subtract the direct and indirect operation costs. The resulting figure should represent a net profit. If it is a loss, then you’ll know that you need to choose the alternative. At this point, you may also want to consider the fact that owning equipment can have an unwanted effect at tax time. On the other hand, leased equipment counts as an expense.
For many healthcare facilities, leasing medical equipment makes the most sense. With careful consideration, you’ll be able to determine whether leasing or purchasing is best for your situation.
09 Sep / 2016
A revolving line of credit is a relatively common debt financing tool for many small companies. However, there are also a certain percentage of firms that are not quite sure of how to take advantage of business lines of credit. If yours falls into this category, you may want to learn more about them, especially if your firm has cash flow issues on occasion.
A line of credit is mainly used on a short-term basis and is often relied on to finance working capital when a company, for a variety of reasons, is cash poor. For instance, it can be used when scheduled receivables are late yet operating expenses (like rent or payroll) are due. A line of credit can also be used to take care of seasonal or short-term expenses such as inventory purchases or investing in equipment. Some businesses also use them to take advantage of a discount offered by a supplier or to pay bills, which would otherwise have interest added on.
There are usually no fees to apply for one, and it also doesn’t generally start accruing interest until you actually start using it. As such, there is no immediate cost to get a line of credit. So, once you’ve been approved, the lending institution makes the funds available which you can then use on an as needed basis. After that, you typically begin paying interest on the balance on a monthly basis. Once it has been paid back, the funds are then made available for future lines of credit.
Businesses, however, that top out their credit line quickly and can only make the minimum monthly payments, should be cautious in applying for one. Otherwise, it could up end up draining your cash flow too much, along with not being able to make much of a dent in the principal. As a result of stressing your business’ balance sheet, it could also hurt your ability to acquire other types of credit in the future. Thus, you want to make sure that you can utilize a line of credit in the correct way.
The key factor to lenders granting one is usually based on the strength of a company’s cash flow. They also often want to see that the company has a steady flow of receivables, its credit history and assets.
Conventional wisdom states to not wait until you need lines of credit to apply for them. Contact an online lender today for specific details on how they can meet your business needs.
04 Aug / 2016
Tax season can be a stressful time for both new and experienced business owners. Knowing what a business can claim, how much or how little can be claimed and many other issues arise which make the process a little less simple than most people might like. Of course doing these things correctly (or incorrectly) may have an impact on your business, whether good or bad. To get started off on the right foot with your small business’s tax preparation this year, read the following guidelines of what you should pay attention to when filling out the pertinent information.
When it comes to income portion of small business tax paperwork, there are many things which should be taken into account. Receipts from outside sales and services, sales records for the past sales periods, returns and allowances experienced throughout the tax year and the interest accrued by a business’ checking or savings account should come into play with this portion of the process. Any other income experienced outside of these categories should also be reported in your tax preparation for good measure.
If your small business creates its niche in the world based on sales, these earnings should be reported as well. The cost of these goods are integral to the correct calculation of your taxes for the year. Inventory, inventory costs, purchases, ending inventory dollar amounts, materials or supplies associated with the upkeep of the inventory and all other related aspects of your business should be included in your tax preparation each and every year in order to ensure accuracy.
Expenses are the largest part of balancing the books, and subsequently the largest part of the tax preparation form for small businesses as well. Depending on the type of business you own, this category could include many subcategories which cover a wide variety of goods or services. Advertising, phone and computer services (and the machinery), transportation associated with the business, commissions associated with the hiring of outside resources, insurance, interest expenses, rent, office supplies and wages paid to employees are all things which can and should be added to the paperwork for the best, most accurate result.
Doing taxes can be difficult, and preparing the information for a small business can be a rather complex undertaking. By getting and idea of what you’re getting into and preparing a checklist instead of time, you can expedite the process and help to make the results as accurate and beneficial as possible with less stress this tax season.
07 Jul / 2016
Owning a supply business means that you have plenty of customers who rely on you for the valuable inventory they require to keep their specific establishments running successfully. While there are many ways for you to please your customers and increase your sales, it can be a great idea to explore options that will allow you to achieve both. Trade finance, for example, is an alternative payment method that can benefit both you and those who turn to you for service. In order for you to see how this can be an advantage to your business, it can be a helpful to explore the specifics of what this service entails.
Essentially, trade finance is a payment option that consists of a customer opting to choose to finance a purchase rather than pay right off the bat. This can be a lifesaver in many ways for your customers. When business is slow for one of your clients, it can mean that there will be a bit of hesitance when it comes to stocking up on inventory. If you are used to these customers making regular purchases, this can mean your sales will take a hit. With trade finance, a customer who may back away from large purchases can feel encouraged to stay the course. This can help you to improve the relationship you have with your customers while simultaneously ensuring that you will get the usual cash flow that you expect.
When a customer has the luxury of paying for a service or product over the course of several months, it can make all the difference with the cost and volume of what is being purchased. With the right options, you can offer your clients a chance to finance purchases in a way that is both helpful to their needs as well as your own. You can dictate the specific interest rates and conditions of the financing when you reach out and speak to a credit company that can help you to set up this service in your establishment.
While there are plenty of advantages to using this service, there can be some minor drawbacks. If your customers are late with payments, it can wind up causing your business to suffer slightly. To remedy this, it can be wise to think long and hard about which of your customers you offer this service to. A reliable client that always makes consistent payments is ideal, but you will have to use your own discretion. In order for you to learn the specifics of what trade finance can do for you, reach out to a provider and see how you can go about setting this service up for your supply business.
10 Jun / 2016
Remember the old adage “it takes money to make money”? This is the number one reason why stores use retail financing. Before a retail store can even open its doors it must have doors, which requires leasing, buying or building a store front, and having a physical location is only the beginning. Before the first dollars come in, thousands of dollars must go out to cover the expenses of inventory, advertising and general operations.
A retail store cannot survive if it doesn’t have merchandise on the shelves. In order to keep your shelves stocked with the variety consumer’s demand, you will need to have enough inventory to fill those shelves and attract customers. The money needed to provide that inventory comes from retail financing because you’ll need to have the product to sell before you can make a profit to cover the expense of that product. Retail financing ensures the business owner’s ability to maintain a sufficient inventory of merchandise on a daily basis, as well as providing the means of stocking up on inventory in preparation for seasonal business spikes.
Another reason why stores use retail financing is for advertising because no matter how much merchandise you have, if the customers don’t know your business exists, your business will fail. This is especially true for new businesses that need to spread word of their existence and establish a solid customer base. Not only will this financing cover newspaper advertisements and radio spots, but it will also cover the expense of creating and running a website to improve customer traffic in the store itself. As your business becomes more established, billboards and local television advertising can also be financed.
Finally, probably the most common reason why stores use retail financing is to fund general operating expenses. Funds used to cover general operating expenses usually comes in the form of working capital loans. This money is used to cover the everyday costs of doing business such as payroll, building maintenance, and equipment, as well as heating, cooling and electricity along with other expenditures associated with day-to-day business operations.
There are many good reasons why stores use retail financing. In addition to inventory, advertising and general operating expenses, retail financing can help renovate or expand an existing business as well as cover the cost of cleanup and construction resulting from vandalism or natural disaster. The answer to the question of why stores use retail financing is that they can’t afford not to.