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KJCE 1370AM>Audio on Demand>>The Small Business Financial Show Podcast 4/6/14

The Small Business Financial Show Podcast 4/6/14

Apr 6, 2014|

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If you're a business owner pay attention. It's time for the small business financial shows with a small business tax consultant. Professor and lecturer comfort shoe -- split comfort did you -- knowledge you need to increase profits and grow your business now. Here's your host comfort. -- -- It's a small business financial I am your host conference and helping you as a small business owner find success in business. You can listen to previous broadcasts of -- -- gonna talk thirteen seventy dot com. And you can find practical insightful information. Beneficial to your business at the small business financial website which is. SM BI easy financial dot com. With increased credit regulations making it a little tougher. For small business owners to get access to funding business owners are looking for alternative solutions. In part one of this series. I started off by sharing with you that without money. Business owners could run into a number of challenges. However. Almost every business owner who needs funding -- plan to obtain money by getting the -- a traditional loan from a commercial think. And when notified that they have been denied that they feel. Helpless at times. It can be tough sometimes. When you're looking for money to pay tax that. Take advantage of an expansion opportunity. Meet their basic date today. Operating funding needs of your business or even to -- to start paying yourself. Reasonably because you've got a family to provide for. I want you to also note that. -- I am sharing with you about these funding solutions if York. A salon owner you run a plumbing business you own a small retail store. For example on these are just a few of the businesses. That I'm giving examples of these solutions are also available for you as well. Many times small business owners are under the impression that only certain types of businesses qualify for funding not so. There are solutions. For you as well. What is helped many business owners. Who have not. Qualified for the traditional business loans -- commercial bank. For example is the widely known. As BA -- Which is a loan guarantee program provided through the US Small Business Administration. From office to support and encourage the growth of small business development across our nation. The Small Business Administration offers counseling. Mentor being as well lists furry. Education to small business owners through the score association. But. What I wanna share with you it's the rarely understood. Or shall I say not so widely known funding options because at times. Your situation has a small business owner is yeah. A little complicated. And you need solutions that are a bit more shall we say creative. Further this is a small business financial show. And we are here to ensure that we provide you with valuable insightful information. To help you become successful in your business. So we want to -- share with you some of them secrets. And down to mystify a few things. -- woman. Of our funding finding money for your business series I talked. About a business line of credit. Which is a solution to help you meet your short term working capital needs. A line of credit at a commercial bank is a revolving loan. At the bank extends TU four appear to -- For example you might have the lion open and available to you opt for two or five years where you pull what you need. Pay it back that you don't you know have to apply for a loan again for this line again you would just simply have access to the money. For the term set or the amount of years that the the bank has extended it to you for. So let's say you need some money to help you cover operating meets for just a few weeks or months. A line of credit it's perfect for that. A line of credit is an unsecured. This is the definition -- that an unsecured funding solution. For small business owners however. At certain financial institutions you can get a secured line of credit. Some people have thought of the line of credit in terms of a credit card. On -- but they're bear is a difference. And sometimes. You are able to use a cart to get access to the two to the funds but it's not a credit card. Opera say it is a line of credit. They'll unsecured or secured. Opt for a line of credit you may be required to be. At least two years in business to qualifying. With some commercial banks. You do have the flexibility. Of using the funds for any purpose you can use it to -- For leasehold improvements. -- leasehold improvements are. Improvements -- or alterations. Two permanent pictures. You make. At your released a business space or you know -- out rental space. I mean retail space. So you can do things like on and hence your Lorraine. Install. Certain interior design features such as partitions. Or lighting. Sometimes you can just you know you just need to cover a few major repairs and building. Your landlord is not going to be covering says you can. Use a line of credit for this -- of credit are also great to cover our working capital needs when your receivables. Are not coming in as quickly as unique and two or. You may use it as overdraft protection. You know for your bank accounts so if you're out their purchasing inventory. -- even minor business expenses. You know even though you don't have enough funds you know those that line of credit can actually be linked to your bank account. So as you're making charge is out there is he purchasing. Whatever shortage the difference that you need -- will automatically come out of your line of credit to. Cover the difference. Lines of credit are also great to cover other. Types of expenses that you may have in your business such as payroll. The costs associated with obtaining a line of credit is fairly low. You typically pay interest on the portions that you use. And that there is usually an annual -- so let's say that you. We're given a line of credit of a 100000 dollars. In you only use 20000 dollars then at the interest is not going to be on the whole 100000 is just going to be. On the 20000 dollars that you -- outs on to do whatever it is that you needed to use it for. -- but there will be you know an annual fee so it just depends on the lending institution on what relationship you have. What them. Now what happens. When you actually get the -- for traditional business loan or line of credit at a commercial bank. Well today there are many funding options that you can get through non banking financial institutions. These are known as alternative financing solutions for small business. One common. And we're gonna talk about a few of them but I'm gonna start with them. Receivable factoring. Sometimes you will hear that term revenue base financing or can be called ACH financially financing they all mean the same thing. I receivable factoring is a line of credit or loans backed by your accounts receivable. And just so that. We are clear because sometimes. -- didn't depending on in your experience. At certain Tom terminology in the business industry. I hate you may not understand. You know -- accounts receivables and some people referred. Are referred to it as. This receivables. So these are pretty much. So that you made on credit you haven't collected you know the payment CI. On completely from Europe your clients and customers. And say -- Europe you you have under this is an -- CU. As far as your books -- concerned. So but you have not collected the money yet but it's out there it's coming missed just taking a little longer than usual. In this situation lending institution will give you on a cash advance. Some lenders will find you up to 90% of your receivables. And then. To pay them back they will collect your receivables. When they come. So this works well with let's say medical offices for instance because. You know the insurance companies do not pay the medical clinics immediately. For services rendered to patients. So to help the practitioners. For example -- private practice to stay afloat lender will offer the cash advance. And collect fronts from the insurance company. While being medical office. You know gets the difference once those funds you know actually come in from the insurance company. Another type of about them factoring. Is -- known as the merchant cash advance. Now. The difference between the merchant cash advance because both of these examples -- and share with you are factoring. The difference is one is backed by your credit cart sales that would be emerging cash advance and then the receivable factoring is. Backed by your receivables. Are right. You are listening to small business financial here on talk thirteen seven and we are going to. Take a break. That they do because I have some more solutions to help you get money for your business. Yeah. Yeah. -- for you small business owner looking for answers to help you solve your business challenges like port access funding for your business seeking help understanding. Flat tax issues what to do to be a profitable business well look no further. Visit the small business financial website at SMB -- -- financial. Or you can learn about upcoming workshops networking events I get lots of free information again go to small business financial's website -- SMB IC financial. Welcome back to the small business financial shows once again here's your host -- comfort should that it's. We welcome back. You're listening to the small business financial show on in your house discomfort she -- helping you as a small business owner find success in business. You can listen to. Previous broadcasts of our programming talk thirteen seventy dot com. And you can find practical insightful information beneficial to your business at our website which is SM. BI easy financial dot com. We are talking about solutions to help you get many for your business before the break I shared with you about a line of credit. Which are great to cover our working capital needs. When your receivables are not coming in as quickly. As you need them to you or it. You may want to use that aren't as an overdraft protection for your bank accounts. I also want to just simply notes that for those of you that our new start ups or. And so proprietor is on you wouldn't necessarily qualify for. A business line of credit because your to starting your business or. It's it's not expandable list. But it. I suggest getting like a personal line of credit you know and just from start with that. I mean after all as a sole proprietor. You or your business and your businesses you so as you're getting your business set up. Are growing it you might wanna consider getting a personal line of credit. -- down -- to help you with the funding needs you know just sort of like an emergency option. And then as you grow your business you can done on the go ahead and apply. For business credit line OK the next thing you mentioned before the break what's receivable factoring. And here we're we're talking about the alternative financing solutions which is what most of this particular. -- series is going to be focused on. And so we started off with these receivable factoring. Line of credit or loans which will be backed by your accounts receivables. And in this situation at the lending institution will give you -- cash advance. And I mentioned that previously that some lenders will when you up to 90%. Of your receivables. And then to pay them back you know they would just simply collect your receivables as they command. And where we left off was the merchant cash advance. So let's move forward with discussing the merchant cash advance now with the merchant cash cash advance. The lending institution will provide you with cash advance against the portion. You know a portion of your future credit -- stealth instead of your receivables. So pretty much York collecting money now again it's future credit card south. -- and the back the lending institution will simply collect a daily percent chance. You know of your. A bureaucratic heart cells. This choice of alternative financing works very well for. Entities that are restaurants for instance because restaurants. Customers pay most of the time. What the credit card or debit card that can be used as a credit cart. And some institutions. On that provide this alternative not funding source. I mean solution -- Lend you a ten million dollars. But like all financing options he must meet the you know lending institutions requirement. The qualifications to receive this sort of funding includes being in business for at least a year and remember we're not talking here about commercial banks -- now moved into discussing. The all alternative solutions. Armed with -- non banking financial institutions. -- credit worthiness rolls are much more relaxed. At least 5000 per month and credit card Selz. Are required to. In many cases but at times with lesser credit -- so he can get funding based on the amount of cash flow that's actually coming into your business. You may also need to provide tax returns -- statement. And credit card statements as proof to support. You know any any decisions. They need some kind of proof that you are bringing in what you're saying your bringing -- Many times startups will not qualify for the marching cash advance. Because of the challenge of verifying. You know cells or credit card receipts you know the history of that. My understanding the options that are available to you. And what the requirements argue could actually plan appropriately so that you you know set yourself up ahead of time for approval. If you are in need of funds for your business please do reach out to us pat down. A small business financial. SMB -- easy financial dot com or just send us an email to small business taxes. At gmail.com. As we do have relationships. You know with some financial institutions who can get. You know get you the funding that you need you know to help you solve your problem. So now. If you do you lose. Equipment in your -- that's. For example your in the textile business let's say you run printing press a medical office a restaurant. Or you are in the construction. Industry. You actually leverage your equipment. As a way to gain access to funding. We call this asset base -- dean. And it is yet another alternative solution for financing. So with this solution you will pledge your fixed assets such as machinery or real estate. And it will serve as collateral. Sometimes you can even use your inventory as collateral but that depends on what you have -- inventory. Some financial institutions will offer small business owners up to five million dollars with this -- type of problem. -- funding option. And that the payment arrangements can be scheduled -- you believe you know it's you know daily payback. Methods of weekly or even monthly. If you are getting equipment financing in the form of a line of credit because that option is available to. Terms -- maybe anywhere between two and five years. And if you are getting equipment financing in the form of alone you could possibly get terms between five and ten years. Now usually with equipment financing. The life of the aspect is taken into consideration what this means is that the financial institution will consider. How long the -- will be useful. In production. In the temple. All operations. Other business. Some financial institutions will offer you. What's called. Equipment financing. As opposed to asset based. On lending. Where you can get funding in as little as 72 hours to purchase the equipment that you need is not wonder full. Many times major come. And equipment or as we call it in the accounting world capital assets will have a residual value or salvage value. What this means is after it is depreciated. For the expected years of usefulness in the typical you know. Business operations. What you could get for it are what you sold for it because. It was still have some functional years left -- it. Let's say you know someone might want to buy used equipment. Or may wanna negotiate a price on using equipment while the -- institutional considering that residual value when deciding on what terms. A financing to give to you so that's going to be based on the useful life. So this also means that you lose the business owner will be able to reduce your tax liability your maximum maximize their after tax profits. By depreciating the finance equipment. Each year for the years of the equipment you know predetermined useful life. So that you wanna get with your account and about that. And for price your equipment I would definitely. Recommend some tax planning because there there's some key strategies out there that you can use. You know it offers great peace of mind when you realize that you have so many other options to help with funding for your business. Remember that you need to have a plan to determine. How you'll use. The -- funds to generate income and cover your costs associated with the business line or loans. Something that is in theory important bringing to know is that Walt credit scores and not a major qualifying. Requirement for alternative funding sources. If your credit is -- Your interest costs are fees you know for access to these alternative funding solutions. Will be higher. And in some cases much -- -- the cost of having you know credit poor credit worthiness but you do get the money you need to help you achieve your business. On both. If -- fallen into this category there are credit enhancing programs for small business owners went you know less than perfect credit. Which will help -- is that business owner in the future obtained access to funds at at lower rates. The finding solutions that I'm sharing with you. Here are too you know help bring awareness to you. So before you use many of these options make sure that you have a clear understanding of the interest rates. The additional costs. Assess whether it will be a good fit for you in your business you know it's gonna work for you make sure that you understand the terms. The financial institutions expectation you know sometimes lack of understanding of these. These type of things you know puts puts business owners -- trouble in what was meant for good all of a sudden you know turns out. To be back. Make sure you and have a plant and I and I can't stress this enough. You know I would I would once you know. As I have recommended both born in previous some. Episodes that. You know see how you again you know increase the revenue to bring in funds first before you looked into borrowed money. So take a look at your business model and see how you can tweak it to make it work. But make sure you have a plan and how you're going to make. Other financing work for you and how you plan to pay the money back. I certainly believe that the more. You know the more confidence you'll have been operating your business and the last time you spend stressing over issues you know where you feel helpless. But be sure to do your own research and dig a little deeper okay. There are several options. It's just a matter of knowing what's available. And where you can go to get it you know breaking go to get what you mean. Well you can count on us here at small business financially to a you know -- sister and bridging the gap. We have. I'm not even gotten to Angel investors in crowd funding. As I mentioned in the first part of this series we will not be able to cover everything in one episode so. Plan on joining us next time here on Austin's top thirteen seven needs. Learn more. And if you missed any of our previous episodes. Just go to the top thirteen seven. I hope you have enjoyed this episode of small business financial it's you are small business owner we would love to hear from you send us your questions. -- there's something you would like us to talk about on the show please do let us know. Send us an email to small business taxes at gmail.com. Board just visit our website at ask -- B I easy financial dot com. Think different listening.

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