Business Financing For Start Up Businesses

Business financing can be extremely difficulty especially for a new business. There will surely be expenses to take care of and it is up to the business owner to find reliable resources to finance the business. The good news is there are several financing options to choose from. Aside from loans offered by banks, you can also rely on other sources. Let’s discuss these options one by one.

Secured and Unsecured Business Loans

Acquiring a loan is the traditional method of financing a business. This proves to be true not just for start-up businesses but even for established businesses as well. Whether a big or a small business, applying for a loan is the most viable option.

There are two types of business loans in the market – secured and unsecured business loans. A secured loan involves the submission of collateral such as property, vehicles or equipment. If the borrower is not in the position to provide a security for the loan, then an unsecured loan is recommended.

Unsecured loans do not require the submission of collateral, but lenders tend to limit the amounts they are willing to lend due to the higher risk of this form of financing.

Loans from the SBA

The Small Business Administration or the SBA created a number of loan programs that are especially designed to help small businesses. If you have been recently rejected by a bank or a lender, you can ask for assistance from the SBA.

The SBA does not directly provide financing for small businesses. The SBA collaborates with other lending companies, and provides a guarantee on behalf of the borrower. A lender will be more confident to finance a small business if the loan has been guaranteed by the SBA.

It is important to understand that there is a standard set of criteria that the loan applicant must meet to be able to get approved for an SBA loan program. To know more information, be sure to visit the SBA’s website to see if you are eligible to apply.

Business Line of Credit

Another option is to apply for a business line of credit. A credit line is extended by a bank or a lending company but unlike a loan which is given as a lump sum payment, this form of financing gives the borrower the option to borrow money at any time within a preset period, without having to go through the process of loan application. Having a line of credit gives a small business enormous support especially during times when cash flow is tight.

Business Equipment Leasing

Business leasing is also a method of business financing accessible for both new and old businesses. Instead of applying for a loan or a business line of credit to have sufficient cash for purchasing equipment, a business owner can lease or rent the needed equipment from a leasing company.

Many business equipment leasing providers offer lease programs for established, new and even start-up businesses. Evaluate the lease programs available and choose the one that’s best suited for your business type.

When to Sell Your Business

Every business will eventually change ownership and the decision to sell a company can either be viewed by the owner as the most agonizing event or the most liberating. Some owners are ill prepared for a business transition and are caught off guard by deteriorating health, unanticipated financial calamities, divorce, or personal stress. These owners are forced to sell without proper planning and often receive less than optimal remuneration for their company. Other owners recognize that in order to maximize the business value, similar strategic planning done during the years the company was being built is also required prior to selling the enterprise.

The goal of this article is not a crystal ball analysis as to why selling a business now is the perfect time; the article’s intent is to review the factors that can influence the timing of this decision and the necessity to prepare well in advance for the eventual business transition or sale. Life’s circumstances are ever changing and proper succession planning is the single most important way for an owner to take control of the terms and conditions of exiting a business. There are a variety of reasons for business control transfer and those who are proactive in an exit plan implementation are often able to realize greater opportunities to maximize the businesses value, minimize tax liabilities, retain key employees, and mitigate emotionally charged family issues.

Determining the best “time” to sell a privately held business will depend upon a number of factors, both internal and external. Ultimately, the timing decision is influenced by the reason(s) behind the sale, especially given the fact that not all business sales are pre-planned. While value maximization is historically near the top of the wish list when a sale is contemplated, it is often balanced with the owner’s personal goals and lifestyle needs. Some of the most common reasons for a business sale or transition include:

• Quality of Life/Retirement – Owning a privately held business consumes a considerable amount of time with corresponding opportunity costs. Most owners reach a point where they are interested in other life pursuits, whether that be spending time with a spouse/children/grandchildren, engaging a personal hobby, or taking the time to travel the globe.
• Diversification – A privately held business typically represents a significant component of family wealth and the owner will be keenly interested to diversify this asset into other investments.
• Burn Out – Many long term business owners lose the “fire in the belly” that they once had when the company was founded. As a result, highly successful and functional businesses can show lower sales and profitability as a result of reduced ownership commitment and drive. Most experts recommend that the proper time to sell a business is before this condition poses a threat to the business operations and/or value.
• Illness – Encountering a personal or family member illness is one of several “unexpected” reasons that can cause a business sale to be pursued.
• Divorce – The break-up of a marriage has been responsible for the sale of many family run enterprises.

Company performance, tax implications, buyer activity and the economy are all contributing factors involved in creating “perfect timing” for the sale of a business. Timing a sale at the peak can be very difficult due to the unpredictable variability of the many internal and external factors. Sales contracts are won and lost, new competitors come into the market, technology becomes obsolete, and business expenses can skyrocket (e.g. health care costs)…any of these events can affect future sales and earnings and thereby have a material impact on the company valuation.

Company Performance
The profitability and cash flow of a business is one of the key drivers in determining the company’s value and marketability. While buyers are looking for companies that have potential to grow and generate reliable earnings in the future, the valuation in the majority of cases will be tied to past performance and achievements. A business with a solid earnings history that is equipped with stable personnel/management in an attractive industry will be highly marketable and should capture a fair price regardless of the economy. Other business specific factors that can influence valuations and play a role in the timing decision include:

• Competition – How has the business performed during the recent economic downturn relative to its competitors?
• Concentration of Customers – What percentage of revenue is generated by the top 3-5 customers?
• Business/Industry Trends – What have been the trends for the trailing 3 years – revenue, COGS, expenses, and net income? What factors will positively or negatively affect future earnings?
• Areas for Growth – What new products, new markets, or economic factors will enable top & bottom line growth?

Tax Implications (Current vs. Future)
Business owners should be well versed in the tax costs (income, capital gains, estate, personal property, and payroll) involved in the sale of their business and how the net after tax dollars will be affected as these taxes are increased. Understanding the effect of pending tax increases, enables business owners to make informed decisions as it relates to maximizing the net after tax dollars through the intelligent structuring and timing of the business sale transaction.

Understanding the conditions that create increased buyer demand can often help formulate timing decisions.
• Cost of Capital / Interest Rates – 3rd party financing is responsible for funding a majority of privately held business sales. The level of interest rates has a direct impact on the cost of capital, and will create greater value to the targeted business when rates are low. A tightened credit market can reduce the pool of qualified buyers as it typically increases the credit and collateralized asset requirements necessary for loan approvals.
• Quantity of Buyers – A poor economy (while detrimental to many companies earnings) often increases the number of available business buyers, as displaced corporate executives seek to leverage their skills and retirement savings to acquire a company as a future source of income and livelihood.
• Competitive Companies for Sale – The number of companies for sale in a given industry or geography can impact the pricing that these companies capture in the marketplace. The much discussed retiring baby boomer phenomenon is predicted to put downward pricing pressure on businesses, as the number of companies becoming available for sale increases.

It is important for business owners to continually evaluate their exit plan options throughout all stages of their business. The subprime lending crisis and financial market turmoil over the last several years has caused more and more business owners to reassess their life goals and retirement plans and compare those to the opportunity cost of managing their current business. For some business owners, a near term exit is not financially possible. With the help of a competent business intermediary they can develop a transaction that is structured to enable them to stay involved with their business in some capacity, post sale. Obtaining professional assistance to determine the current market value of the business and establishing the framework for an exit strategy provides that ‘windows of opportunities’ are not missed. Thus the transaction value of a going concern business can be maximized while the company is still relevant, profitable, and possesses viable growth prospects for the future.

The question of “when” is the right time to sell the company is probably one of the most frequently asked questions by a business owner. In many cases, the best time to sell is when an owner does not have to. Few owners contemplate selling the company when the business is rapidly growing and the company is clicking on all cylinders. When times are lean and earnings have pulled back, owners also become hesitant to sell based on the feeling that the specific dollar value they have in mind for their enterprise may not be realistic in the current market. In both instances, the “buying power” generated from the sale proceeds could be nearly equivalent given the efficiency of the financial markets. During a strong economy a higher transaction value may be realized but the value of comparable assets (e.g. real estate) will also be at a high level. Conversely, a business sold in a more sluggish economy may net fewer dollars for the seller but could provide a higher level of buying power based upon the value of comparable assets in which the proceeds are likely to be re-invested.

2 Overlooked Aspects of Kitchen Design

When it comes to kitchen design, what are the things that tend to stand out more than anything else? Most people would answer that it is the appliances. The reason for this is that the kitchen is a work area, an area where the functionality in most cases will outweigh the aesthetics. That leaves a huge array of items completely overlooked that could potentially have done a lot to work toward the overall look you are going for in your kitchen. The purpose of this article is to briefly outline two of the most unappreciated, yet most important aspects of kitchen design.

Kitchen Doors

Kitchen doors can be an undervalued part of kitchen design that is often simply overlooked because it is not an appliance or other obvious piece of decoration that really stands out. Still, choosing the right kitchen door can not only accentuate the particular design choice you are going for in your kitchen, it can also serve to blend the kitchen in with the rest of your home design. This is of particular important if there is a significant design different between your kitchen and the room beyond.

Kitchen Tiles

Though not nearly overlooked as often as the kitchen doors may be, kitchen tiles serve to provide the background ambience in the kitchen, along with the lighting. Consider a kitchen that has pure black tiling versus a kitchen that has all red tiling or all blue tiling. Each of these kitchens will create a vastly different mood in the person observing them, simply because of their color. Since there are hundreds, if not thousands of colors and designs available, the possibilities are simply endless.