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Finance tips for your new business

manlookingnewspaper30336850.jpgIf you have a new business venture on the horizon, one thing you may struggle with is finding the money to jump start your organization. Finding $100,000 or more to get your new business started is going to be a challenge but its one you can accomplish with the right type of information and the right lender. Here are some finance tips for new business owners:

Watch the interest
Whether you have been in business for several years or you are just getting started you need to keep an eye on the interest rate for your small business loans, credit cards, invoices, etc. Having high interest rates can eat up your cash flow and it will absolutely ruin your business. Interest rates that are considered "fair" will be under 8%, anything above this isn't worth your time. Some lenders will try and convince you that your business is a high risk and that's why the interest rate is higher. While you may have a risky business, it still doesn't warrant an interest rate of 23% or more. Always compare the interest rates and negotiate with lenders and vendors until you have one that you are comfortable with.

Keep a consistent cash flow
Another important finance tip is to keep an eye on your cash flow. You always need to have a strong cash flow in order to run your business correctly. Work hard to get your customers to pay their bills on time. If you practice invoice financing with your customers, start asking for a down payment amount initially. This is a great way to secure the funds you need for your cash flow break-even point and then you can focus on collecting the rest of the invoice later. Another option you have to maintain a consistent cash flow is to work with a factoring company. A factoring firm will provide you with 80% of the total invoice amount up front and then focus on collecting the funds from your customers. Once the customers make their payments to the factoring firm, they will provide you with the rest of the money minus their fees. This is a great way to maintain a positive cash flow because you only need to wait a few days before you get the money from the factoring firm instead of waiting a couple months for your customers to pay their bills.

Mix financing sources

If you are trying to get money from lenders and you have a hard time convincing them to provide you with a loan, there are other options you can use. Instead of only using your lenders to secure funds, you can also use pension accounts, savings accounts, investors, credit cards, and other places. Getting a mix of money from all different areas will allow you to acquire the money you need to start your business and to also expand it in the future. Just make sure you aren't drawing on all of your personal savings and retirement accounts to start your business as there is no guarantee that you will be able to replenish the funds.

Collateral
A simple way to acquire the financing you need for your business is to provide the lender with collateral for the loan. Collateral provides the lender with a lower risk ratio and allows you to acquire a higher loan term and lower interest rate. If you have a piece of real estate to secure the loan, this will be your best option to secure the loan. However all of the risk will fall back on you and you will lose your property if you default on the loan and your business fails.

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