Buying a Business - Understanding Small Business Financing

As a business broker I am frequently discussing with clients and prospective buyers methods of small business financing. Once a buyer and seller agree on price and terms, it all boils down to due diligence and financing.

A lot of factors can determine how lenders will view your deal. It will depend on the type of lender, type of business, and what kind of assets does the business own that can be used as collateral. Is there real estate involved in the transaction?

A commercial banker or loan broker will show you what factors matter most and get your deal funded with their products.

Cash and Equity

Of course, if you're paying all cash, none of this is your concern, however 100% cash deals are not the norm.

Every business is unique and different, but one thing is certain before you seriously consider pursuing a business for sale: You or one of your partners will need sufficient liquid capital or equity for anyone to finance your deal.

Bank Financing

The stories of a "no money down" deals and 90% seller financing are rare and I have personally never seen one that was legitimate.

Again, depending on various factors, when acquiring small business financing through a commercial lender, there is a good chance you'll need 20-40% cash/equity down on the business, financing the balance with debt capital.

You will probably pay "prime + 2" in interest, meaning if the prime rate is 8%, your interest will probably pay 10%.

The term of the loan will probably be 5-10 years. Many of the commercial loans I've seen are 7 year terms.

Business with Real Estate

If you are acquiring real estate in addition to the business, many products are available as "Blended Loans". These loans are "blended" with the standard "real estate loan" (10% down, 30 years).

You end up with roughly a 15% down payment, and a term of 18 - 22 years, which is great for keeping your debt service down and increasing your Cash Flow.

On the other hand, 15% of business and real estate can still be a sizable down payment.

The cost on the "blended loan" will likely be more favorable as well with the real estate as collateral.

Seller Financing

Most small and mid size companies will involve a portion of seller financing.

It is appropriate to amortize the financing over a period of time and have a balloon after 2 or 3 years.

This way the financing serves two purposes: Funds the deal and shows that the seller has confidence in the business - and the buyer.

Small Business Financing - What Are Your Options?

In the meantime, one has a wide variety of options for small business financing. Fortunately, you have other resources to rely on, unlike just bank loans as it was in the past.

What are the options that are commonly overlooked?

Currently, many unconventional sources of finance are coming up as well, e.g. contract financing, which is one of the widest preferred options. Indeed, it is also known as purchase order financing. Following this option, a lender finances the purchase order rather than the manufacturer. Consequently, the lender gets the agreed portion of profit when the process is finished. This is known as purchase order financing.

What is the next option?

One more type of finance options is to think of grants for small businesses. But, one negative aspect of this option is the fact that grants are not considered that reliable. However, venture capital is one of the small business financing options that is best defined by many applicants. This is especially true since the firms, which fund the proposals presented, are from the small enterprises. The only limitation with these small business loans is that they just finance a very few ventures.

Do you have any other options?

You can avail finance for your small business by selling your debts and stocks in the mass market. But again, one thing you should know is that it is not a common method of getting any help because of its difficult procedures. A large number of small businesses are now funded with the help of debt finance through financial institutions like banks. In this context, banks provide small business owners a line of credit or loan with a repayment term and schedule, as well as, a rate of interest.

How can a financial institution make an educated decision?

In fact, financial institutions or banks will deeply look for how profitable your business is. So, to improve your chances of being financed, just prepare a good business plan. A plan will show them the prospects of your business and, therefore, it will increase your chances to get accepted.

Have you ever thought about the option of debt funding?

There are many private debt investors who invest on a small business through debt funding. To make it a win situation for them, they ask for some equity ownership stakes in return. Borrowers from any class can opt for equity options. Despite having a bad credit rating that may include bankruptcy, default, arrear, CCJ or IVA, one can apply for this option without any problem. Obviously, you will need to put in some efforts for making these financial deals cost effective.

What is the best choice that I can recommend you?

You can easily apply online for your loan. This will surely save a lot of time and endeavor. Concretely, this will help you to navigate through many varieties without leaving your home. In this context, it is recommended to compare a plenty of finance choices and choose the best solution for the small business system you have. Doing this, you will minimize the risk to waste your money. To get the best of a financial deal, you will need to put in some time in research. This will help you find out the right financial option for you. In this article, the message was to list different small business finance options and the best choice is your decision.

Business Financing and Mixed Signals For Small Business Owners

Business financing programs are resulting in mixed signals for borrowers. Business lenders are increasingly reducing or canceling commercial lines of credit, refusing to refinance commercial mortgages and turning down new requests for small business loans. In contrast to their actual lending practices, most lenders have announced that they are lending normally to businesses. These mixed signals are due to a variety of financial and economic issues, but the end result is likely to be confusion for small business owners.

Having enough cash flow to support daily operational requirements is a critical need from the perspective of a small business owner. Very few businesses are debt-free, and the inability to borrow needed funds on an ongoing basis will quickly produce serious consequences. It is probably fair to say that the average business owner does not understand why they are currently unable to get adequate working capital or commercial loans from their current lender. The primary mission for commercial borrowers is likely to involve locating new sources of capital once they realize that their current lenders might not be up to the task of helping their business financially.

Looking at this perplexing situation from a lending perspective, it is likely that most commercial lenders truly want to be more active in providing small business financing than they currently are. However, many banks are undercapitalized and have been forced to increase their liquid assets to satisfy government standards. This can force such banks to make fewer new loans and to cancel some existing loans. In other cases, lenders have depended excessively on short-term commercial financing sources and now find themselves short of capital to make loans because their own business funding sources are proving to be inadequate.

Some good news emerging from this confusing lending climate for small businesses is that there appears to be an adequate supply of new lending sources to fill the void left by the exit of many banks and other lenders from commercial lending. A prominent commercial lender recently announced that they needed more capital in order to continue making small business loans. Even though the failure of this lender would be inconvenient to businesses using their services, it has become clear that there are indeed other lending sources sufficient for solving the problem.

Despite the unfortunate complications due to mixed signals from lenders, business owners are in better shape than they probably realize to make it through the current business funding chaos. In order to increase the chances of their business surviving, borrowers should take a more active role in their business financing.

Small Business Financing Resources For Restaurant Or Retail Business Owners

There are small business financing resources to help you start your business but if you don't know where to go start here with these resources.

Government Small Business Loans - Visit or call your local business library or government agency. You can apply on a local, state, and federal level to get the money you need to commence and grow your business.

You could get a small micro loan, disaster relief loan to rebuild your business from a natural disaster or a simple short term lending loan. You might even be able to get a loan based on your geography!

Veteran Loans - For those who have served in the armed forces, you may be eligible for a veteran loan to use on your small business. Check with your local veteran's chapter to apply and see if you qualify for a loan and how much you might be able to get to use on your business.

Small Business Loans - The Small Business Administration is a nationwide operation. They are located in all states and offers small business loans and resources to those who qualify. The Small business administration deals through private financial institutions, to help you get low interest loans. In addition they have all types of resources you can tap into and you should. They have available online resources you can tap into to help you with your business, live training, free consulting, etccc You definitely have to go pay them a visit online or in person.

USDA - For those involved in produce and working the land for food purposes to be resold, in the agricultural industry, then you may qualify for a small business loan. Check out the USDA website to find all of the information you need about their small business loans and what information they need when you apply.

Women - Being a women in business or trying to start a business does not mean you have to do it alone, in fact women are responsible for a large percentage of small businesses that are in operation. There are many small business loans that cater to owners who are women. Some are offered through your state while others are offered through small business corporations, organizations and non-profits.

Minorities - For those whom are considered a minority, there are all types of programs to help you start your business. There are some small business loans provided to qualifying minority groups. The MBDA works with minority groups and evaluates their situation to determine if they can apply for a small business loan. They also offer many tips and resources to help you get started with your business venture.

Grants - The business library in your local area is an excellent area to start to tap into the grants available through the government, corporations, non-profits, and other organizations. This type of money is called free money to some. This is money that doesn't have to be paid back, but with some grants, there are specific regulations on how the funds can be spent.

Research thoroughly all the various many small financing business financing resources available for almost any situation. Make sure you check out all of your options to see which resource will work best for your business needs.

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Business Finance

Financial planning is the application of planning to various aspects of finance function. Basically, business finance involves the formulation of a financial plan that states the quantum of finance required, the pattern of financing and the policies to pursue for the administration of the financial plan. A business enterprise requires short-term and long-term capital. The total capital required by a concern is called capitalization. The short-term capital or the working capital is the capital required to meet the day-to-day obligations or the operating expenses. The long-term capital is required to acquire the fixed assets. Generally, on a conservative ground, a portion of the working capital is also met out of long-term capital.

The capital required may be collected from different sources. A substantial share is raised from internally generated funds. The remaining part is raised from outside sources such as issue of shares and debentures and loans. This pattern of financing is known as capital structure. It is designed in such a way to obtain the required amount needed at the lowest possible cost. Once the required amount is raised, then the funds are allocated in the best possible way to obtain the maximum benefits.

Implementing proper control systems can ensure the efficient use of the funds. Finally, all-important matters are reported to the top management to take proper actions at the right time. The financial reports are analyzed to evaluate the performance of the firm. According to Cohen and Robin, business finance aims at determining the financial resources required meeting the company's operating program. Business finance also forecasts the extent to which these requirements are met by internal generation of funds and the extent that they will be met from external resources. Business finance helps in establishing and maintaining a system of financial control governing the allocation and use of funds.

Business Finance - Tips on Where to Get It

Starting up a business can be exciting but can also be challenging especially if you do not have adequate funds to get going. The financial aspect of any business is very important and needs to be planned and managed appropriately. It is important that you have a business plan detailing your objectives, strategies, target markets etc. You should also have done thorough market research so that you are able to gauge your competition and also what the consumer market thinks of your product and/or service. Even with all this ready, it can still be quite difficult to arrange for business finance.

There are many ways in which you can access funds but it is up to you to select the one that will benefit your business most. You will need adequate funds especially when starting for your business to be successful. You will need to buy equipment, pay rent, have enough stock, and hire reliable employees etc, just in the first few weeks. Many businesses are prone to failure if they do not have proper management or enough start up capital. That is why it is important to raise enough money.

One source of this capital could be your savings, but most times it is never enough and you may need additional funds. At this point you could approach friends and family who have financial resources to help you out. Banks are another option of business finance but it is important to shop around to ensure that you get the best deal. Asset financing is another alternative where you can access finance with secured assets like real estate. The assets are used as collateral and if you default on payment your property will be seized.

Venture capitalists are another source of business finance. They invest in new or growing businesses that have the potential to grow. Business finance helps in managing the system of financial control that deals with the allocation and use of funds.

Commercial Loans And Small Business Financing - What To Avoid

It is always advisable to have a detailed understanding of what can go wrong with commercial loans and working capital financing. The five factors described can have negative and long-lasting financial results for small business loans and commercial real estate loans. Business owners should be prepared for these real possibilities.

Most commercial borrowers do not want to experience a worst case for commercial real estate loans and small business loans. When present simultaneously, there are five particular factors which will usually result in a serious outcome that is nevertheless avoidable. Understanding each of the issues should enable borrowers to avoid a potentially devastating working capital financing outcome.

Here are the issues which we believe will usually result in a worst case scenario for commercial loans if all five are present: (1) Dealing with an inexperienced commercial finance advisor; (2) Using a lender which historically has an unacceptable track record for successfully completing commercial loans; (3) Obtaining business financing that includes a recall option for the lender; (4) Inappropriate and non-competitive business loan terms; and (5) Short-term financing in which a borrower is not also offered the opportunity to lengthen to a longer-term period.

Our primary advice is to totally avoid circumstances where all five factors exist at the same time. A secondary recommendation is to also seek alternative financing for commercial loans when either of the first two elements are present. There are likely to be many working capital management scenarios where it will be impractical to avoid all of the issues described in the preceding paragraph.

It is important for business owners to secure commercial financing which is not impacted by the worst case conditions. Business owners will subject themselves to inappropriate business financing terms for a very long time if they do not take appropriate action before they finalize commercial loans. There are two points which should be emphasized.

Our first point is that business loans are probably more complicated than realized by most commercial borrowers. There are a number of additional serious commercial funding obstacles beyond those noted in this brief article. Because of this, it is important for commercial borrowers not to narrowly focus on the factors included in the worst case scenario discussed here and simply avoid these specific issues.

A balanced analysis of both the worst case aspects and other critical business finance terms is essential for comprehensive working capital financing. The importance of this overall perspective is why we emphasized the critical nature of avoiding both inexperienced brokers and lenders.

Second, the worst case scenario for business loans described above is totally avoidable. But to avoid an obstacle, it is critical that you have a working understanding of what you are avoiding, what it looks like and any special techniques required to evade it. For example, if you are driving a car, it is common sense that you will not intentionally drive your vehicle over sharp pointed objects that are likely to puncture your tires.

With commercial loans and commercial real estate loans, the combination of the five factors noted previously in this article will typically produce an impact for small business funding that is equivalent to much worse than simply puncturing a tire. Unfortunately, without proper advice and knowledge, most business owners will not be prepared to recognize the appropriate warning signs for avoiding business financing hazards.

In this article we focused on problems with small business financing that will almost always have long-lasting and immediate negative results for business owners. Commercial borrowers should not overlook the multitude of other serious problems with commercial loans beyond those described. As with the circumstances noted above, most of the other potential difficulties with business loans can also be avoided.

Small Business Finance Bad Dredit - Make Efforts For Low Cost Funds

While you make search for small business finance with a bad credit tag, one aspect that should be at the upper most on your mind is the costs. Any such loan that drains away larger portion of your finances towards the monthly outgoings will result in stress on your trade.

If you have a history of late payments, defaults, arrears or CCJs, then the loan approval will be harder to get. You should save money for making greater down payment, which gives a sense of security to the lender and the approval comes with ease.

One way to ensure a less burden some finance for your trade is to approach the lenders with an excellent or good credit rating. Make sure that your FICO rating is above 600 or in the vicinity of it. Get copies of your credit report to make it fully free of any misrepresentation of the facts about the payments you made in the past. In case of the rating being lower, then make timely payments for few months for improving it, before applying for the loan.

Ensure that you have made a convincing plan of repaying the finance. You would be using the loan for variety of purposes like buying the raw material; equipment, machinery etc. hence, keep a good amount of money in your bank for few months at least. This will give the impression that you can repay the loan installments, without depending on our business.

You can choose to borrow small business finance in secured or unsecured options. Greater funds can be accessed under the secured loan against your residential or commercial property. Lower interest rate is the main advantage of the loan. you can repay the loan in 5 to 30 years. The unsecured loan has no risks for the business people, as it comes without collateral. However, only smaller amount will be approved for 5 to 15 years, at higher interest rate.

First, apply for the rate quotes, so that you can have access to select small business loans bad credit, which are of lower rate and few additional charges. Repay the loan on time for escaping any debt accumulation.

Functions of Business Finance

Introduction:

The ultimate goal of any business is to be profitable at all times and earn money; it is money that helps a business to grow and expand. In order to be successful, an organization needs to able to manage money in a sophisticated manner and so all organizations have a finance department that takes care of different monetary transactions.

The financial department in any company consists of various sub-departments or teams to take care of many functions, apart from buying and selling of products, thus business finance is the broad term that describes all functionalities of the finance department of a commercial enterprise.

The two main functions of business finance:

Investments: Functions include finding investment options for the company such as, creating new products, asset acquisition, increasing local purchase of securities or shares, etc. Also the decisions of investing in mergers and acquisitions for the expansion of the company have to be scrutinized by this department before the Board of Directors can finalize them.

Financing: This team deals with seeking funds for the company from various sources like banks, financial institutions, investors, share holders, capital market etc. and then assessing the funds so that the company can get borrowed capital at the lowest interest rates possible and with minimum liabilities.

Additional Functions:

Accounting: This team keeps a track of all monetary transactions in the form of accounts so that the expenditures of an organization can be tracked, to calculate the net profit at the end of the year. Keeping a track of the expenses helps the company to set the prices of all the products and the services offered, in a way that the net expenditure should be less than net income.

Payroll: They handle the salary payments of the all the employees of an organization; functions like calculating yearly bonuses, salary increase and also rolling out pay structure for new joiners are accomplished by them; this is done by working in coordination with the recruitment team.

Billing: This sub-department takes care of the billing process and prepares an itemized bill, which is sent to the clients at the end of the month, for the purpose of payment. It is of enormous importance in the service industry where an error in the bill can strain commercial relations with clients.

Thus, effective management of business finance is necessary for the smooth functioning of an organization and this can only be achieved by having a well-defined goal for the finance team.

The #1 Reason Your Best Business Financing Choice Could Be Asset Based Lending

There is one overriding reason why asset based lending could be your best choice for business financing in Canada. What is that reason? Simply that it works when other types of financing are not available or don't fit your current financial status.

The reality is that asset based lending works for all firms in all types of industries, and is not dependent on your overall financial performance that might be the focus of a more traditional based financing. That's a powerful statement, so let's examine what the financing is, how it works, and answer some key questions that might help business owners and financial managers determine if this financing is the solution to many, or all of their financing challenges.

So let's back step a bit. What is asset based financing. Focus on one key word in that phrase - assets! This method of financing simply allows you to monetize and draw on the market value of the assets of your firm. Those assets are in very predictable categories, they are receivables, inventory, equipment and real estate. If you have one or all of those your firm is a prime candidate!

In some cases this method of financing is confused with factoring. Factoring is the sale of one of those asset categories - your receivables. An asset based line of credit lends against receivables, but also includes, inventory, equipment, etc. That is the difference!

The prime difference in qualifying for such a facility is really the difference that exists when you compare this type of financing to a Canadian chartered banking relationship. That banking relationship comes with a number of requirements that are often not needed when an asset based line of credit is in fact your real and best solution. Some of those traditional requirements might be profitability, years in business, the type of industry you are in, guarantees of shareholders and owners, etc. Those qualifications are not the focus of asset based lending. However the assets are.

On a day to day basis how does this type of business financing work. It's quite simply. You and your asset based lender determine on a regular basis, i.e. weekly, monthly, etc what your asset categories total - a borrowing based is then developed on those categories and funds are depositing into your bank account for use as working capital by your firm. In Canada a 250k facility is more or less the bottom level of this type of financing, and facilities can be arranged into the many millions of dollars.

So if you want an easy way to remember the difference between this type of financing and a bank revolving line of credit simply remember that the bank focuses on overall financial strength and cash flow, our facility focuses on assets!

Because your assets are being financing as the primary focus of this type of facility you will have to report on those assets probably on a much more regular basis, so your firm should be in a position to prepare regular reports on receivables, inventory turnover, etc. When fixed assets are being financing, i.e. unencumbered equipment you own, etc then in many cases an initial appraisal will be required. This small dollar investment though can generate thousands or hundreds of thousands of dollars in working capital.

For "asset rich" companies, an asset-based loan may make more funds available because it is not based strictly on the anticipated levels of cash flow. Additionally, the structure often requires fewer covenants, providing more flexibility for many borrowers.

So why is this then in many ways the best method of financing your business? Does it actually add cash to your firm? That is where some confusion comes in, but simply think of it as no adding new cash per se to your firm, it simply accelerates or quickens the cash flow that is traveling through your business. By financing your receivables and inventories to the maximum possible you turn over new sales and generate increased profits, and that's what business financing is all about.

You may not even have heard of asset based lines of credit, perhaps you have but didn't understand how it works or how it compares with other types of business financing. Investigate how this facility can become potentially your best choice in the overall financing of your business. Speak to a trusted, credible and experienced advisor who can work you through the Canadian landscape of asset based lines of credit.

Six Words to Describe Business Financing

This report was produced in a direct effort to provide more understandable insights about some of the most critical business finance issues effecting commercial borrowers. Our approach in this report is to describe current commercial loan circumstances in six words. We have adopted a similar model in other commercial finance reports such as "seven words to describe commercial property loans". The "simpler is better" perspective reflects the belief that after hearing an almost endless number of reports about commercial lending difficulties, what small business owners might really need is a more concise explanation about these problems and the resulting impact on their business financing options.

Before proceeding, it is important to emphasize that small business finance options are often more complicated than anticipated by many business borrowers. We are definitely not attempting to characterize business loans and working capital financing as either straightforward or simple. In fact, quite the opposite is the case. The unfortunate reality that most business financing processes have always been excessively complicated and that meaningful improvements are not on the way is one of our ongoing observations. We nevertheless feel that it is critical for each small business owner to have an absolute and total understanding of the entire commercial finance process in the face of the prevailing commercial lending complexity. To help in providing more understandable insights about commercial loans and business banking problems, this particular report is one of several thorough efforts on our part.

Our first example of six words describing business financing options is "banks are saying no more often". For any small business owner still unaware of this harsh reality and who might doubt this observation, a series of candid conversations with other business borrowers will probably remove all doubts. The failure of banks to provide an adequate level of business loans on a widespread basis is the primary point to remember. It is important for small businesses to realize that they are not alone when they hear their bank say no to routine requests for commercial financing.

"Commercial property values have decreased dramatically" is a second observation. There are very few exceptions. The biggest business financing impact is likely to occur with commercial refinancing situations. Many banks are aggressively recalling existing commercial real estate loans and this literally forces a borrower to seek business refinancing even if a business owner has no interest in refinancing their commercial mortgage. With decreasing commercial real estate values, business refinancing will be a challenge for most small businesses.

"Lines of credit are disappearing fast" is another six-word description of commercial financing. Even the most successful businesses need a reliable source of working capital financing, so this situation is especially serious if a business cannot replace bank financing when it suddenly disappears. Even if a business still has an adequate line of credit, it is important to realize that on a widespread basis banks are reducing and eliminating business credit lines with almost no advance notice.

As our final observation in this report, "business financing is in intensive care". Extreme measures such as firing their banker and finding alternative commercial funding sources will need to be anticipated by small business owners in many cases. Bankers have not been sufficiently candid about commercial lending problems in the past, and nobody should expect that they will publicly announce that they are in any kind of financial trouble. On the contrary, a prevailing outlook from most banks is they are lending normally to small businesses. When dealing with any commercial lender, commercial borrowers will need a healthy amount of skepticism.

As we noted, this article is one of several efforts to help small business owners survive an extremely challenging commercial lending environment. This report was intentionally designed to produce a concise overview of several complex small business finance issues by describing commercial loan difficulties in six words. A better understanding of practical business financing options for commercial borrowers should also be realized by reviewing related reports such as "six words describing working capital management" and "seven words to describe merchant cash advances".

Small Business Finance - Why You Need a Business Proposal

Starting a small business is normally characterized by a lot of finance related factors that you will need to consider. A small business venture may seem just that, small, but it requires a lot of input when it comes to the finances. It calls for proper planning to be able to come up with the required amount of funds over a given period of time. Do not be fooled, to be successful in your operations you must have enough finances at hand.

To be able to determine how much cash will be needed to start or run the business, you must first determine how much the enterprise is worth. This is best done through writing down a proposal that captures all that the enterprise hopes to do in a given period of time and how it plans to expand its operations. The proposal is the document that you are going to present to potential investors who may just be interested in funding your business.

There are several ways through which you can get business finance, but again depending on the level of growth at which the enterprise is. For start up finance, you may consider going for a loan from financial institutions like banks and other lending firms. Once they have a look at the proposal you will present them with, they will be able to determine just how much they can afford to lend you. You also need to clearly demonstrate how you plan to repay the loan.

Other sources of finance for a small enterprise include grants, which are basically offered by the government through small business administration organizations. These are agencies that represent the government in business matters and they handle all issues that pertain to finances. There are qualifications that are required for the grants and all that information is available at the SBA offices.

Business Financing - Three Easy Steps to Getting a Business Cash Advance Approved

Are you missing out on business opportunities due to a shortage of funds? Are you tired of waiting for weeks or months to get your business loan sanctioned? Is your business financing application asking for an array of unnecessary financial documents? Are you fed up of all the intrusive questioning surrounding your loan proposal? Are you looking for a quick and hassle-free way for getting a line of credit for your business and gain advantage over your competition? If yes, then a business cash advance, also called a merchant cash advance is the solution to your problems.

Business cash advance is a funding alternative that is revolutionizing the world of business. While a traditional loan application can take months to process, business cash advance providers release funds within a week, sometimes in less than 3 days. The application is available online and is easy to fill. Further, you don't have to provide a multitude of financial documentation to get your application approved.

The application process works in the following manner:

1. Lining up an Approved Credit Card Processor Business cash advance is not a loan, rather an advance purchase of your business' credit card receipts. Thus, to receive this type of funding, you should already be processing major credit cards like Visa or MasterCard. Open an account with an approved credit card processor and process credit cards for at least six months before submitting your application.

2. Submitting an Application Business cash advance providers need you to submit only your business and credit card statements with your application. Your application is evaluated using two criteria, number of months in business and your average monthly business income. Typically, you are required to be in business for a minimum of 9 months and have an average monthly credit card receipts of at least $5000 to be eligible for funding.

3. Evaluating the Cash Advance If your application is approved, you will receive a contract from your provider. This contract will specify four crucial pieces of information.

* Future Credit Card Receipts Amount - This specifies the amount you sell to the provider for an advance. It is also the total cost of your advance.

* Total Loan Amount - This specifies the amount of money you will receive from the provider.

* Percentage of Daily Credit Card Sales - This specifies the percentage of credit card sales you will repay to the provider every day. This percentage should be fixed. Watch out for hidden clauses that allow unscrupulous providers to manipulate this percentage at a latter stage.

* Penalty Terms - The terms specify contingencies and the ways to deal with them.

Upon receiving the contract, read it carefully. Make sure you understand every term and condition specified in the contract. Remember that the business advance is not a loan. Your contract is your only legal safeguard against fraudulent providers. Once you sign and submit your application, business cash advance will be released, usually within one week or less.

Business cash advance allows you to receive funds quickly and easily. To make the most of your funding, familiarize yourself well with the funding and the application process.

Uncommon Business Financing Options For Mid Sized Companies

Getting any type of business financing has been incredibly challenging for business owners. One of the market segments that has been most affected by this are middle sized companies. Although bigger than their small company counterparts, they are usually not big enough to qualify for the business financing options that are available to larger companies. But without financing, most will never grow or flourish.

One alternative is to go the conventional route and try to get a business loan (or a line of credit) from a bank or a lending institution. However, credit requirements have been tighten substantially and few businesses are able to qualify for any type of financing. And those that do must be ready to provide and substantiate a long standing track record of profitability. Additionally, both companies and business owners can expect to put more collateral than previously required to secure the loan. Although conventional business financing may be out of reach for some companies for the time being, there are other options that can be used to finance their growth.

One alternative is to use invoice factoring. This type of financing is ideal for companies that have clients that pay in 30 to 60 days, but needs the funds sooner. Factoring helps businesses that need to convert invoices into cash to meet payroll or start new projects. One advantage of factoring over other alternatives is that factoring companies are most interested in the strength of your invoices, as that represents a company's best collateral. So a midsize company that has no other collateral than invoices from strong clients can usually qualify. Companies that usually benefit from this type of financing are labor intensive businesses, such as staffing agencies, and consulting companies among others.

But factoring can't always help every company. Consider this example. Suppose a product reseller, gets a large order from a retailer. The reseller needs funds to buy the product from their supplier (or manufacturer), in order to fulfill the purchase order. One good alternative is to use purchase order financing. Purchase order funding can provide the funds to pay the supplier, enabling them to fulfill the order. The transaction is settled once the retailer pays for the goods. Qualifying for purchase order funding is harder than qualifying for invoice factoring. To qualify, the transaction must have a minimum of 20% gross margins and the client must buy the finished goods from their supplier.

Although not widely used yet, these business financing alternatives have been gaining traction in the current economy. They enable mid size businesses to grow by allowing them to leverage on their most important assets - the purchase orders and invoices from their customer base.

Five Small Business Finance Tips

Owning a small business involves much more than coming up with and implementing a business idea. Small business owners quickly learn that a huge part of their role as the owner of a business means learning how to take care of the financials. Here are several tips for small business owners who want to learn the best practices for managing their business' finances:

1) Bookkeeping

To the dismay of many business owners, the ancient art of bookkeeping isn't going anywhere. Fortunately, bookkeeping has become much easier. Bookkeeping programs can make the process much easier, but there are still certain fundamental rules that business owners must take into account. Firstly, business owners must always keep a record of all of the invoices processed by their business as well as the expenses they have incurred, such as raw materials, salaries, and operating expenses. While there is no solid rule for how to keep track of earnings and expenses, what matters most is that you keep track of your finances in a consistent fashion and that everything is written down. This is arguably the most important part of owning a small business.

2) Don't Over-Exaggerate Your Earnings

When working with investors, banks, or other financial lenders, one of the biggest mistakes you can make is to exaggerate your business' earnings. These lenders need to know how likely you are to repay the money they have lent you when making their decision about whether or not to lend it in the first place. Lying or exaggerating about your earnings will only harm you and the lender in the long run.

3) Make Sure All Of Your Funding is Backed by a Legal Contract

Regardless of where you are going to receive funding, you need to ensure that the terms of your financial agreements are written down on a contract. Unfortunately, things can become troublesome during the repayment process and it is therefore urgent that you and your lender lay out terms in the beginning that you must adhere to later on. This keeps both sides accountable and also ensures that both sides know exactly what they are getting into before the money starts circulating.

4) Cash Flow

A successful small business always maintains a sufficient amount of cash on hand to take care of daily operations and unexpected expenses. However, many businesses that have been successful in receiving funding find that the money they are lent covers already-existing expenses but doesn't quite leave enough cash left over to keep on hand. This is why small business owners are familiar with the feeling of being stuck somewhere between outstanding invoices and bills that are past-due. One option for small business owners is to use a merchant cash advance. These types of business cash advances can provide small businesses with additional cash flow to meet these expenses or to grow their business, and they are repaid through future credit card receivables. This is an important option to consider for many small business owners who have been denied other forms of funding.

5) When to Process Credit Cards

The short answer: Now! Being cash-only is extremely inconvenient for most customers. While setting up a credit card processing system can be costly, your customers may find it more convenient to go to your competitor's business once they learn that your business doesn't process credit cards. Furthermore, using credit cards at your business functions as an instant line of credit and means less hassle and paperwork for your business. This can cut down on lengthy credit approval processes. Also, there are additional types of funding available for businesses who process credit card transactions as opposed to those who don't.

Sources of Business Finance

Sources of business finance can be studied under the following heads:

(1) Short Term Finance:

Short-term finance is needed to fulfill the current needs of business. The current needs may include payment of taxes, salaries or wages, repair expenses, payment to creditor etc. The need for short term finance arises because sales revenues and purchase payments are not perfectly same at all the time. Sometimes sales can be low as compared to purchases. Further sales may be on credit while purchases are on cash. So short term finance is needed to match these disequilibrium.

Sources of short term finance are as follows:

(i) Bank Overdraft: Bank overdraft is very widely used source of business finance. Under this client can draw certain sum of money over and above his original account balance. Thus it is easier for the businessman to meet short term unexpected expenses.

(ii) Bill Discounting: Bills of exchange can be discounted at the banks. This provides cash to the holder of the bill which can be used to finance immediate needs.

(iii) Advances from Customers: Advances are primarily demanded and received for the confirmation of orders However, these are also used as source of financing the operations necessary to execute the job order.

(iv) Installment Purchases: Purchasing on installment gives more time to make payments. The deferred payments are used as a source of financing small expenses which are to be paid immediately.

(v) Bill of Lading: Bill of lading and other export and import documents are used as a guarantee to take loan from banks and that loan amount can be used as finance for a short time period.

(vi) Financial Institutions: Different financial institutions also help businessmen to get out of financial difficulties by providing short-term loans. Certain co-operative societies can arrange short term financial assistance for businessmen.

(vii) Trade Credit: It is the usual practice of the businessmen to buy raw material, store and spares on credit. Such transactions result in increasing accounts payable of the business which are to be paid after a certain time period. Goods are sold on cash and payment is made after 30, 60, or 90 days. This allows some freedom to businessmen in meeting financial difficulties.

(2) Medium Term Finance:

This finance is required to meet the medium term (1-5 years) requirements of the business. Such finances are basically required for the balancing, modernization and replacement of machinery and plant. These are also needed for re-engineering of the organization. They aid the management in completing medium term capital projects within planned time. Following are the sources of medium term finance:

(i) Commercial Banks: Commercial banks are the major source of medium term finance. They provide loans for different time-period against appropriate securities. At the termination of terms the loan can be re-negotiated, if required.

(ii) Hire Purchase: Hire purchase means buying on installments. It allows the business house to have the required goods with payments to be made in future in agreed installment. Needless to say that some interest is always charged on outstanding amount.

(iii) Financial Institutions: Several financial institutions such as SME Bank, Industrial Development Bank, etc., also provide medium and long-term finances. Besides providing finance they also provide technical and managerial assistance on different matters.

(iv) Debentures and TFCs: Debentures and TFCs (Terms Finance Certificates) are also used as a source of medium term finances. Debentures is an acknowledgement of loan from the company. It can be of any duration as agreed among the parties. The debenture holder enjoys return at a fixed rate of interest. Under Islamic mode of financing debentures has been replaced by TFCs.

(v) Insurance Companies: Insurance companies have a large pool of funds contributed by their policy holders. Insurance companies grant loans and make investments out of this pool. Such loans are the source of medium term financing for various businesses.

(3) Long Term Finance:

Long term finances are those that are required on permanent basis or for more than five years tenure. They are basically desired to meet structural changes in business or for heavy modernization expenses. These are also needed to initiate a new business plan or for a long term developmental projects. Following are its sources:

(i) Equity Shares: This method is most widely used all over the world to raise long term finance. Equity shares are subscribed by public to generate the capital base of a large scale business. The equity share holders shares the profit and loss of the business. This method is safe and secured, in a sense that amount once received is only paid back at the time of wounding up of the company.

(ii) Retained Earnings: Retained earnings are the reserves which are generated from the excess profits. In times of need they can be used to finance the business project. This is also called ploughing back of profits.

(iii) Leasing: Leasing is also a source of long term finance. With the help of leasing, new equipment can be acquired without any heavy outflow of cash.

(iv) Financial Institutions: Different financial institutions such as former PICIC also provide long term loans to business houses.

(v) Debentures: Debentures and Participation Term Certificates are also used as a source of long term financing.

Conclusion:

These are various sources of finance. In fact there is no hard and fast rule to differentiate among short and medium term sources or medium and long term sources. A source for example commercial bank can provide both a short term or a long term loan according to the needs of client. However, all these sources are frequently used in the modern business world for raising finances.