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Small Business – Additional Notes on Getting a Loan

August 27, 2013 Leave a comment
English: Cash Money Store for short term loans...

English: Cash Money Store for short term loans on Yonge St., Toronto downtown, ON, Canada (Photo credit: Wikipedia)

It is often said that small business people have a difficult time borrowing money, but this is not necessarily true. Banks make money by lending money; however, the inexperience of many small business owners in financial matters often prompts banks to deny loan requests.

Requesting a loan when you are not properly prepared sends a signal to your lender. That message is: “High Risk!” To be successful in obtaining a loan, you must be prepared and organized. You must know exactly how much money you need, why you need it, and how you will pay it back. You must be able to convince your lender that you are a good credit risk.

Terms of loans may vary from lender to lender, but there are two basic types of loans: short-term and long-term. A short-term loan generally have has a maturity of up one year. These include working-capital loans, accounts-receivable loans and lines of credit. Long-term loans have maturates greater than one year but usually less than seven years. Real estate and equipment loans may have maturates of up to 25 years. Long-term loans are used for major business expenses such as purchasing real estate and facilities, construction, durable equipment, furniture and fixtures, vehicles, etc.

- See more at www. cashaccountingcpa.com

Small Business – Essentials to Remember When Seeking a Loan

August 26, 2013 Leave a comment
Loans

Loans (Photo credit: zingbot)

If you are considering a loan to help finance your small business, you should keep a few essentials in mind.

When reviewing a loan request, the bank official is primarily concerned about repayment. To help determine this ability, many loan officers will order a copy of your business credit report from a credit-reporting agency.

Using the credit report and the information you have provided, the lending officer will consider the following issues:

  • Have you invested savings or personal equity in your business totaling at least 25 percent to 50 percent of the loan you are requesting? Remember, a lender or investor will not finance 100 percent of your business.
  • Do you have a sound record of credit-worthiness as indicated by your credit report, work history and letters of recommendation? This is very important.
  • Do you have sufficient experience and training to operate a successful business?
  • Have you prepared a loan proposal and business plan that demonstrate your understanding of and commitment to the success of the business?
  • Does the business have sufficient cash flow to make the monthly payments on the amount of the loan request?

See more at Cash Accounting & Business Services

Keep a Close Eye on Cash Flow in Your Business

August 15, 2013 Leave a comment

Whether you have a home-based business or a small business in town, one of your chief concerns will be your cash flow.  Accounting records can help you monitor this closely, so make sure that you are able to determine what your cash position is at any time.  This means more than just looking at the daily bank balance.

In accounting terms, your cash flow statement provides that vital information you need for wise business decisions. Many small business owners do not fully understand their cash flow statement. This is surprising, given that all businesses essentially run on cash, and cash flow is the lifeblood of your business.

Some business experts even say that a healthy cash flow is more important than your business’s ability to deliver its goods and services! That’s hard to swallow, but consider this: if you fail to satisfy a customer and lose that customer’s business, you can always work harder to please the next customer. But if you fail to have enough cash to pay your suppliers, creditors, or employees, you’re out of business!

What is Cash Flow?

Cash flow, simply defined, is the movement of money in and out of your business; these movements are called inflow and outflow. Inflows for your business primarily come from the sale of goods or services to your customers. The inflow only occurs when you make a cash sale or collect on receivables, however. Remember, it is the cash that counts! Other examples of cash inflows are borrowed funds, income derived from sales of assets, and investment income from interest.

Outflows for your business are generally the result of paying expenses. Examples of cash outflows include paying employee wages, purchasing inventory or raw materials, purchasing fixed assets, operating costs, paying back loans, and paying taxes.

Cash Flow Vs. Profit

Profit and cash flow are two entirely different concepts, each with entirely different results. The concept of profit is somewhat broad and only looks at income and expenses over a certain period, say a fiscal quarter. Profit is a useful figure for calculating your taxes and reporting to the IRS.

Cash flow, on the other hand, is a more dynamic tool focusing on the day-to-day operations of a business owner. It is concerned with the movement of money in and out of a business. But more important, it is concerned with the times at which the movement of the money takes place.

Theoretically, even profitable companies can go bankrupt. It would take a lot of negligence and total disregard for cash flow, but it is possible. Consider how the difference between profit and cash flow relate to your business.

Example: If your retail business bought a $1,000 item and turned around to sell it for $2,000, then you have made a $1,000 profit. But what if the buyer of the item is slow to pay his or her bill, and six months pass before you collect on the account? Your retail business may still show a profit, but what about the bills it has to pay during that six-month period? You may not have the cash to pay the bills despite the profits you earned on the sale. Furthermore, this cash flow gap may cause you to miss other profit opportunities, damage your credit rating, and force you to take out loans and create debt. If this mistake is repeated enough times, you may go bankrupt.

For more, see http://www.cashaccountingcpa.com

 

Planning for Your Home-Based Business — Get Down to Business

August 14, 2013 Leave a comment

 

Money fuels all businesses. Or as I like to say, “cash is king.”  With a little planning, you’ll find that you can avoid most financial difficulties. When drawing up a financial plan, don’t worry about using estimates. The process of thinking through these questions helps develop your business skills and leads to solid financial planning.

 

 

Estimating Start-Up Costs

 

To estimate your start-up costs, include all initial expenses such as fees, licenses, permits, telephone deposit, tools, office equipment and promotional expenses.

 

Business experts say you should not expect a profit for the first eight to 10 months, so be sure to give yourself enough of a cushion if you need it.

 

Projecting Operating Expenses

 

Include salaries, utilities, office supplies, loan payments, taxes, legal services and insurance premiums, and don’t forget to include your normal living expenses. Your business must not only meet its own needs, but make sure it meets yours as well.

 

Projecting Income

 

It is essential that you know how to estimate your sales on a daily and monthly basis. From the sales estimates, you can develop projected income statements, break-even points and cash-flow statements. Use your marketing research to estimate initial sales volume.

 

Determining Cash Flow

 

Working capital–not profits–pays your bills. Even though your assets may look great on the balance sheet, if your cash is tied up in receivables or equipment, your business is technically insolvent. In other words, you’re broke.

 

Make a list of all anticipated expenses and projected income for each week and month. If you see a cash-flow crisis developing, cut back on everything but the necessities.

 

Strengthen your resolve to do things right and seek the wisdom you need to move toward success.

 

 See more at http://www.cashaccountingcpa.com

 

 

 

 

 

Managing Your Wealth – Articles To Consider

June 2, 2012 Leave a comment
English: Macroaxis Wealth Management Large Image

English: Macroaxis Wealth Management Large Image (Photo credit: Wikipedia)

Many wealth managers and journalists provide excellent research into the topic of wealth management.  Here are a few recent articles of interest:

Putting Your Trust in a Trust by Lisa Brown at Brightworth

Your Annual Financial To-Do List by Frank Reynolds and Company

In Rich Families, Old And Young Differ On Inheritance Issues, Study Says by Karen DeMasters

You’ve Asked … Questions About Money, Family and Philanthropy by Douglas K. Freeman, J.D., Lee Hausner, PH.D., Desert Charities News

Color the 1 Percent 99 Percent Conflicted by Fran Hawthorne

Improve Your Business Acumen With These Recent Articles

May 30, 2012 Leave a comment
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