Latest Posts

What to Consider Before You Buy a Home Security System

What's the difference between a home alarm system and a home security system? Technically... nothing! Basically, what matters most is the level of home...

Home Security Alarm System & Burglary Prevention – Why You Must Have Quality Burglar Alarm System

A recent study by a major New York-based online review organization on home security sought to find the role and place of monitored alarm...

Better Home Safety – Low Cost Home Security Tips

Whether you're a homeowner or rent your home, your personal safety and the security of your home and your property are important to you....

What Features Are A Must Have In Antivirus Software?

Several important features are standard in all antivirus programs. And then there're features that you'll find in a few antivirus programs, and these tend...

Small Business Finance – Finding the Right Mix of Debt and Equity




Financing a small business can be the most time-consuming activity for a business owner. It can be the most important part of growing a business, but one must be careful not to allow it to consume the business. Finance is the relationship between cash, risk, and value. Manage each well, and you will have a healthy finance mix for your business.

Develop a business plan and loan package with a well-developed strategic plan, which relates to realistic and believable financials. Before you can finance a business, a project, an expansion, or an acquisition, you must develop precisely what your finance needs are.

Finance your business from a position of strength. As a business owner, you show your confidence in the business by investing up to ten percent of your finance needs from your own coffers. The remaining twenty to thirty percent of your cash needs can come from private investors or venture capital. Remember, sweat equity is expected, but it is not a replacement for cash.

Depending on the valuation of your business and the risk involved, the private equity component will want on average a thirty to forty percent equity stake in your company for three to five years. Giving up this equity position in your company, yet maintaining clear majority ownership, will give you leverage in the remaining sixty percent of your finance needs.

The remaining finance can come in long-term debt, short-term working capital, equipment finance, and inventory finance. By having a strong cash position in your company, various lenders will be available to you. It is advisable to hire an experienced commercial loan broker to do the finance “shopping” for you and present you with various options. It is important at this juncture that you obtain finance that fits your business needs and structures instead of trying to force your structure into a financial instrument not ideally suited for your operations.

Having a strong cash position in your company, the additional debt financing will not put an undue strain on your cash flow. Sixty percent of the debt is healthy. Debt finance can come in unsecured finance, such as short-term debt, line of credit financing, and long-term debt. Unsecured debt is typically called cash flow finance and requires creditworthiness.

Debt finance can also come in the form of secured or asset-based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government-guaranteed finance. A customized mix of unsecured and secured debt, designed specifically around your company’s financial needs, is the advantage of having a strong cash position.




Latest Posts

What to Consider Before You Buy a Home Security System

What's the difference between a home alarm system and a home security system? Technically... nothing! Basically, what matters most is the level of home...

Home Security Alarm System & Burglary Prevention – Why You Must Have Quality Burglar Alarm System

A recent study by a major New York-based online review organization on home security sought to find the role and place of monitored alarm...

Better Home Safety – Low Cost Home Security Tips

Whether you're a homeowner or rent your home, your personal safety and the security of your home and your property are important to you....

What Features Are A Must Have In Antivirus Software?

Several important features are standard in all antivirus programs. And then there're features that you'll find in a few antivirus programs, and these tend...

Don't Miss

What It Means to Be a Modern Online Educator

Traditional college instruction is part of a well-established tradition that has remained fairly unchanged over time. Becoming an instructor in this environment has meant...

Commentary: Current Education Tramples the Mind

Not a day goes by. There is not an article in our local paper on our local Public School System. If it is not...

Enterprise Mobility Applications

Today, many corporations have large mobile workforces in sales and field service roles. Frequently, these mobile workers have little or no remote access to...

Intensification of Mobile Service Providers Network

The Indian telecommunication industry is the world's fastest emerging sector, with about 826.93 million mobile phone subscribers as of April 2011. All this could...

Coming Up Empty In Education Reform

The recent forays into public education reform from the No Child Left Behind Act, the Core Curriculum mandate, and standardized tests have all placed...

Stay in touch

To be updated with all the latest news, offers and special announcements.