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Beat the Credit Squeeze With Flexible Business Finance

The credit squeeze is a fact of business life and is not just about money but confidence in the market too. There are always winners and losers in every business situation and confidence and business finance can beat the credit crunch.

1. Ensure the bookkeeping and financial accounts of the business are up to date.

Keeping the accounting records up to date is an essential first step to ensuring the business owner knows exactly where the business stands. Reviewing recent financial performance and taking positive action to increase sales and margins where possible and control costs by eliminating waste protects the business from surprises and downturns.

By having available the recent costs, views and action can be taken to reduce those costs and in some circumstances to increase business costs where the profit potential is highest. For example a detailed examination of advertising and promotion costs may indicate some campaigns should be reduced while the money saved invested in better performing areas.

Not all sales produce the same profit for the business. By concentrating efforts on the highest profit margin products and services the effect on working capital can be reduced which can take the pressure off working capital funding.

2. Preparing a realistic business plan can help the business plan ahead.

Many small businesses prepare a business plan when starting up especially if government grants or business finance is to be applied for. Failing to prepare an updated business plan during a credit squeeze can be a plan to fail.

During a credit squeeze a business can find itself operating in an unstable market where the rules and actions of the past might not be evident in the future. Banks increase the cost of borrowing, customers save money by leaving the market and sometimes failing to pay or at least taking longer. Suppliers tighten their grip by increasing prices and demanding tighter payment periods.

Business takes steps to protect income, cash flow, liquidity and in extreme cases survival. That is why failing to meet these new challenges is a plan to fail.

Prepare a business plan on the basis of the recent history and extend the financial results forward following the recent trends. Input into the financial forecast the opportunities that can be exploited to increase business and take a realistic view of the potential negative factors that may be suffered.

The business plan should include both a written view of the next twelve months ahead and include a profit and loss account reflecting the optimistic view and the most negative view with contingency plans should the worse scenario become a fact. A cash flow statement calculated from the business plan to show the effects on liquidity is a vital tool.

3. Improve financial flexibility to increase the business finance options.

Arrange the business finances with more than one bank and increase the number of financing options. A single bank may not offer the size of overdraft or loan facilities or the competitive rates the business requires. View the financial market as a competition between suppliers for your business finance and utilise several to spread the finance between them.

By maximising financial flexibility options for bank accounts, loans and overdrafts and financing asset purchases the effect on business progress can be minimised. Consider leasing agreements, invoice factoring and other specialist financial institutions in addition to the main bank account provider. Cash flow and working capital requirements are crucial.

4. Go out and get more sales.

When sales go down it is easy to become depressed. Fight it and remember how the business obtained new sales channels and customers in the past and exploit the opportunities in the future. Focus on the unique selling points of the business and its products and revitalise campaigns to increase sales.

Consider sales and product diversification into both related and other areas. There are always new opportunities including new products and markets, selling existing products to a wider audience including increased geographical presence. It may help to list all sales activities in sales channels and look for more sales channels in which they company can operate.

5. Ask for professional advice and assistance.

Increase the level of communication with each professional advisor including accountants, financial advisors, solicitors, bank managers and business advisors and any managers of financial institutions. The more the merrier and by keeping in touch more opportunities and more favourable responses will be possible.

There is no such thing as a silly question when the future of the business and its employees are at risk. Discussing options with a variety of professional advisors increases those options and if increased business finance is required for growth or survival in the future, the higher level of personal dialogue will ease that route forward.

Startup Business Financing

Before you start to obtain startup business financing, it is very important that you determine the approximate amount that you will require. The current assets minus current liabilities will be the working capital of the business. Most of the time, you can see such information in the balance sheet and through this you will be able to know how much money will be required to carry out your business on a short-term basis.

Having found out the amount of startup business financing required, you will have to think of a way in which you can get a loan for your business.

o Start-up Financing is available to entrepreneurs whose business is based on a solid business model with a credit worthy structure.
o Banks award business loans to those that have a well spelled out plan which showcases your partners, your track record, your strategies and advantages.

Banks are conservative where investments are concerned. The chances of getting a loan will be more for an existing business in comparison to a new one.

o No bank wants to lose money by taking risks. If your business proposes to be a risk, you’ll have to work harder to get your small business loans approved

On the other hand, you will be able to acquire a startup business financing loan if you make a good loan request and have a good plan for your business. Help can be obtained from the SBA as well as the Small Business Development Centers can be obtained easily, as they are situated in most major cities in the United States. Your business plan must consist of your personal bank statements, sales and cash projection. If you are taking the help of the SBA then you will need to state how you will reimburse the startup business financing loan and you will also be required to guarantee the same. The bank might want to see your personal investment in the business apart from the time that you give to the business.

o Banks would want to know your business’s financial prospects. They want to gauge its worth and how much money you’re moving.
o Alternative sources, (excluding banks) may want you to “pay” more for your start up business loan.
o You may have to pay higher interest rates. You might also need to offer some equity in your business to receive funding

Ways in which you can get loans faster and easily

Financial assistance sometimes comes from institutions in the form of credit or loan. This loan can be obtained at a relatively short period of time and there are financial resources that will help you get the loan. Few of such startup business financing resources are:

- Credit cards: You can get a credit ceiling of twenty thousand dollars (for your small business) from big credit card companies if you have a good credit record.
- Unsecured business loans: Try such a loan if you do not want to guarantee the loan personally or if you do not have a credit record.
- Equipment leasing/financing: Many companies are willing to lend you the money taking equipment as collateral for your loan.
- Asset based loan: is ideal for using equipment to acquire loan, account receivable or leveraging your stock.

o Those having a mortgage with a bank, find it easier to obtain small business loans.
o Check newspapers for financing offers. Such institutes grant small business loans and processing might be easier with them.
o Availing a start up business loan has become easier, thanks to a growth in competition among lenders.
o Plenty of channels are available for raising capital. Most of the above avenues have abundant variations. Build up a solid business plan, along with a financial adviser, and just start asking.

Do not forget to check your financial requirements regularly and inform the investors about the financial position as well as the progress of the business on a regular basis.

Samples Of Small Business Subcontracting Plans

Small business subcontracting plans necessarily mean a large business enterprise sub letting or taking help from small businesses. In large business outfits, the amount of office supplies is great hence a small business firm is contacted and a contract is signed with them to provide office materials regularly.

o A subcontract is broadly defined as an understanding agreed upon by a prime contract and subcontractor to provide goods or services needed for complementing the performance of the prime contract.

o The service a small business provides, however, is not necessarily under the prime contract; it should satisfy the prime contractor’s ordinary overhead requirements attributable to the prime contract.

This entire process of contracting out a part of the project to a small business firm is known as small business subcontracting. The contract is made formal only if the costs involved in providing materials exceed $500.000 for the entire period of performance.

o a small business subcontracting plan must state an expected amount of business that the prime contractor expects to award to small business contractors

However, it is untrue that all business concerns need subcontracted businesses to reach the stage of completion.

o In order to ensure completion, each subcontracting plan must name a manager or contract person, called a plan administrator, in charge of promoting compliance under the plan.

Only when the magnitude of the business project demands calculated subcontracts sub recipients are brought into discussions.

The subcontractor’s SBSP mentions the materials to be purchased, the total amount of money that will be spent on each small business outfit and the percentage of money that has been stipulated for supplies and/or services that these purchases represent.

Small business concerns usually used as sub recipients of such huge business projects are:

o Small Disadvantaged Business concern
o Minority Institutes
o Veteran Owned Small Business concern
o Women Owned Small Business concern
o Historically Black Colleges and Universities

Rather than waiting for communication, a small business can contact prime contractors directly to inform them of its small business.

A small business can approach agencies themselves to show inclination of its availability for subcontracting.

A SBSP is prepared by the principal investigator of the project. The principal investigator takes up the responsibility of meeting the goals set in the plan. If the SBSP fails for any reason, the contractor may be made responsible for the damage and the business concern handling the project may be denied new contracts.

Once the SBSP is prepared, it is presented as a part of the business proposal. It is open to negotiation.

o In soliciting subcontracts, prime contractors often seek several small business sources to insure they are obtaining a fair price

o If a small business is dissatisfied with the treatment it receives from the prime contractor, it cannot protest to the agency or General Accounting Office.

The principal investigator informs the Procurement Resource Services (PRS) administrator of the need of subcontractors. The PRS then aids investigators in identifying suppliers as per the requirement of the project.

o Prime contractors are increasingly aware of the need to subcontract with small businesses for delegating work.
o Certain small business contracts stress the possibility of dollar penalties on those failing to meet their subcontracting plans.

Typical samples small business subcontracting plans require the following information:

o Identification Data – name of the company, address, date of preparation of SBSP, Solicitation Number and Item or Service required
o Type of Plan – individual, master or commercial
o Goals – estimated dollar value of all planned subcontracting, estimated dollar value and percentage of total planned subcontracting to large business concerns, estimated dollar value and percentage of total planned subcontracting to small business concerns etc
o Details of Program Administrator
o Equitable Opportunity
o Reporting and Co-operation time line
o Record Keeping
o Timely payments to Subcontractors
o Description of Good Faith Report