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    Home»Finance»Small business finance – find the right combination of debt and equity
    Finance

    Small business finance – find the right combination of debt and equity

    Armando RoyBy Armando RoyApril 11, 2021Updated:June 25, 2021No Comments4 Mins Read
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    Financing small businesses can be the most time-consuming activities for business owners. This can be the most important part of growing a business, but someone must be careful not to allow it to consume business. Finance is a relationship between cash, risk and value. Manage every well and you will have a healthy financial mixture for your business.

    Develop business packages and loan packages that have a strategic plan that is well developed, which in turn deals with realistic and reliable finances. Before you can finance business, project, expansion or acquisition, you must develop exactly what your finances need.

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

    Depending on the assessment of your business and the risks involved, the components of the private equity will want an average of thirty to forty percent of equity shares in your company for three to five years. Submit this equity position in your company, but maintaining a clear majority ownership, will give you leverage in the remaining sixty percent of your financial needs.

    The remaining finance can come in the form of long-term debt, short-term working capital, financial equipment and inventory financing. By having a strong cash position in your company, various lenders will be available to you. It is recommended to employ experienced commercial loan brokers to do financial “shopping” for you and serve you with a variety of choices. It is important at these points that you get finance that suits your business needs and structure, instead of trying to impose your structure into financial instruments that are not suitable for your operation.

    Having a strong cash position in your company, additional debt financing will not put an undue tension on your cash flow. Sixty percent debt is healthy. Debt financing can come in financial formless finance, such as short-term debt, credit financing and long-term debt lines. Unsecured debt is usually called a cash flow finance and requires credit feasibility. Debt financing can also come in the form of financial or-based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government guaranteed. The adjusted mixture of unsecured and safe debt, specifically designed around your company’s financial needs, is the advantage of having a strong cash position.

    Cash flow statements are important finance in tracking the effects of certain financial types. It is important to have a strong handle on your monthly cash flow, along with the structure of control and financial budget planning, to succeed in planning and monitoring your company’s finances.

    Your financial plan is the result and part of your strategic planning process. You must be careful in matching your cash requirements with your cash purpose. Using short-term capital for long-term growth and vice versa is not. Violating suitable rules can bring a high level of risk in the interest rate, the possibility of return financing and operational independence. Some irregularities from old age are allowed. For example, if you have long-term needs for working capital, permanent capital requirements can be guaranteed. Another good financial strategy is to have a contingency capital to free up your working capital needs and provide maximum flexibility. For example, you can use credit pathways to get opportunities that quickly appear and then set cheaper, more suitable, further long-term finance, plan all this in advance with lenders.

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    Armando Roy
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