Dec 9, 2008
The biggest concern with most entrepreneurs, is the availability of seed capital. A wide range of organizations, make use of funds for small businesses. Commercial loans are, however, are increasingly difficult to obtain. Many employers have found the necessary funds managed to scrape together, and build their business without any outside loans or financing. However, they are in the minority. Other small businesses, on the other hand, not yet, despite the injection of loans in their businesses.
Many companies, successfully securing the loans have squandered their loans irrelevant in luxury goods and property is not useful for the business. Lending institutions are tightening lending criteria in order to avoid problems of this nature.
This article will not focus on loans to debate no statistics or if a business loan is needed. Here I will try to cope with the proper use of a loan business for the growth of the company.
The financing of a company can come in various forms, namely the government loans, loans from a bank, a second mortgage on the property, equity / venture capital, loans from family or savings or investments.
When employers calculate their needs, provided they add in their inventory and overhead costs to their capital needs, such as machinery and equipment, and to reach a total requirement of the loan, including working capital and capital requirements.
If more than 40% of the loan is a requirement for working capital, loan funds, basically, consumption and no expansion of the company. A built-in demand for working capital in a loan is understandable. However, a high component of working capital reflects the nervousness on the part of the company owner, in connection with future uncertainty. Business is all about risks, so that a loan can not cover the risks that the business will inevitably face!
Working capital and day-to-day expenses should preferably be funded from current revenues, not loans. This is a factor contributing to the loans that were rejected. Because lenders are opposed to financing the operational costs of borrowing. In the same way that loans and credit cards are dangerous to the financing of expenditure, so that loans are used for the expenses of running a business.
Apart from the danger of the use of loans for consumption, there is a fundamental reason why lenders prefer to finance capital equipment, unlike the overheads. The reason is simply SECURITY! A business that goes belly-up, you can return financed assets, or the lender can attach these assets to cover any costs incurred by the lender. You can not resort to the lender if the bulk of the loan was applied to general expenses.
When writing a business plan for a loan, the business owner should clearly list of necessary goods, their value, and importantly the proposed return on that investment.
The purpose of the loan requirement must always be in need of capital. Many institutions are happy to 10% of working capital component in the total loan, if the business plan is convincing. Another advantage would be the "own contribution" by the employer. The greater one's contribution, the better the prospects of obtaining the loan.
It is advisable that any business owner should make with the help of financial consultants and accountants, not only prior to the loan application, but after getting the loan as well. A frugal plan and the budget should be developed to guide the company as well as monitor the use of the loan. The budgets should also be split between regular income and expenditure, budgets and capital. This will ensure that the company derives maximum benefit from the loans, increase revenue, to ensure that the loan is settled quickly, hopefully before the expiration date.
Many companies, successfully securing the loans have squandered their loans irrelevant in luxury goods and property is not useful for the business. Lending institutions are tightening lending criteria in order to avoid problems of this nature.
This article will not focus on loans to debate no statistics or if a business loan is needed. Here I will try to cope with the proper use of a loan business for the growth of the company.
The financing of a company can come in various forms, namely the government loans, loans from a bank, a second mortgage on the property, equity / venture capital, loans from family or savings or investments.
When employers calculate their needs, provided they add in their inventory and overhead costs to their capital needs, such as machinery and equipment, and to reach a total requirement of the loan, including working capital and capital requirements.
If more than 40% of the loan is a requirement for working capital, loan funds, basically, consumption and no expansion of the company. A built-in demand for working capital in a loan is understandable. However, a high component of working capital reflects the nervousness on the part of the company owner, in connection with future uncertainty. Business is all about risks, so that a loan can not cover the risks that the business will inevitably face!
Working capital and day-to-day expenses should preferably be funded from current revenues, not loans. This is a factor contributing to the loans that were rejected. Because lenders are opposed to financing the operational costs of borrowing. In the same way that loans and credit cards are dangerous to the financing of expenditure, so that loans are used for the expenses of running a business.
Apart from the danger of the use of loans for consumption, there is a fundamental reason why lenders prefer to finance capital equipment, unlike the overheads. The reason is simply SECURITY! A business that goes belly-up, you can return financed assets, or the lender can attach these assets to cover any costs incurred by the lender. You can not resort to the lender if the bulk of the loan was applied to general expenses.
When writing a business plan for a loan, the business owner should clearly list of necessary goods, their value, and importantly the proposed return on that investment.
The purpose of the loan requirement must always be in need of capital. Many institutions are happy to 10% of working capital component in the total loan, if the business plan is convincing. Another advantage would be the "own contribution" by the employer. The greater one's contribution, the better the prospects of obtaining the loan.
It is advisable that any business owner should make with the help of financial consultants and accountants, not only prior to the loan application, but after getting the loan as well. A frugal plan and the budget should be developed to guide the company as well as monitor the use of the loan. The budgets should also be split between regular income and expenditure, budgets and capital. This will ensure that the company derives maximum benefit from the loans, increase revenue, to ensure that the loan is settled quickly, hopefully before the expiration date.
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