The Facts of Financing
Your mother always warned, “Don’t put all your eggs in one basket” and those words of wisdom can be applied when financing a business. There are a number of methods that can aid buyers in financing a business. Buyers must recognize their available resources such as the seller, lenders, and investors.As a child, we’re encouraged to “dream big” and told that nothing can stop us, but ourselves. As entrepreneurial adults, this idea of dreaming big is often a part of your everyday routine, but it is inevitable that at some point you’ll come crashing down from those heights into reality. The realization that financing your particular endeavor can instantly dampen even the most impassioned enterprising individual can get you down. To put it bluntly, “Don’t let it”.Having a reality check on the difficulty of securing financing for a business can be the first step towards making your dream an actuality. There are numerous types of financing available, some more unorthodox or obscure. If you take the time and effort to research all avenues for funding you will be rewarded.There are two main types of financing: debt financing and equity financing. It is important to you and the success of your business that you familiarize yourself with the types of financing in order to choose, seek, and finally, obtain the right form for your needs.Debt financing involves borrowing money that will be repaid over a certain allotted time with a set interest rate tacked on. The time of such financing can be short term or long-term. In most cases, short term financing would include repayment within one year, while long-term financing would entail repayment in a time period that exceeds one year.An advantage of this type of financing is the fact that the lender will not gain ownership in your business. You remain in control and your only obligation to them is to make regular and timely payments. In the case of small startups, a personal guarantee is often needed to facilitate the closing of the financing deal.Equity financing, unlike debt financing, will involve giving the financing entity a share in the business. Some business owners dislike the idea of losing any amount of control. On a positive note, this type of financing does not incur debt. This kind of freedom from debt can give a greater sense of security in starting a new business. In addition, some entrepreneurs find great value in their equity financing partners, and see their presence as an asset.The type of financing you will choose is based largely on the needs of your business and the kind of collateral, or available assets you have to offer. A substantial amount of debt financing can lead to poor credit and a shortage of funds in the future due to an inability to apply for more financing. A business that becomes overextended, offers little collateral, and is steeped in debt is not an appealing option for many investors.As previously mentioned, there are other more unorthodox methods of obtaining funds that can certainly prove to be beneficial to your business. Some options can be found in your own circle of friends and family. One benefit of this type of financing is obtaining the money and a silent partner who will most likely not interfere with your business. It can also eliminate some of the red tape involved with more traditional forms of financing. This does not mean you can simply use a verbal agreement or “shake on it” to signify and bind the transaction. This is still a strategic business move and you must treat it as such which means proper documentation, clear terms, and mutual understanding of those terms.Relationships can be ruined over inept efforts with this type of financing, so value your business and the other person by treating it with professionalism, attention to detail, and respect. Don’t become the black sheep at the next family reunion over some misunderstanding or your falling behind on payments.A few other options that are largely unknown to those who haven’t done research include unsecured loans and micro-loans. Resources such as TheSnapLoan.com or Prosper.com offer loans based on cash flow, credit score, and debt-to-income ratio. Government grants are also a largely untapped resource that is made available to entrepreneurs. Simply researching the website Grants.gov can be extremely helpful in your search for funds.Venture capital is another route that many entrepreneurs look to due to the amount of funding that can be procured. A venture capitalist will likely offer larger sums of money that can be of great assistance to your business, but they will also gain a certain portion of control and ownership. This type of funding however is usually scarce due to the assumption that many startups will inevitably fail. You will need to find someone willing to take the risk and who sees potential in your vision.This type of person could also be found in a more palatable option known as the Angel investor. The Angel investor typically has a high net worth and like the venture capitalist, must believe in the product and the person behind the product. Their loan often converts to stock, preferred stock, or convertible bonds.Les Brown, an author and entrepreneur, says, “Shoot for the moon and if you miss you will still be among the stars”. This is an extremely appropriate sentiment as it encourages you to keep dreaming big and ultimately those dreams combined with perseverance and research will take you closer to where you want to be.The following is a chart that demonstrates the normal financing options available to businesses in different stages of the business life cycle.For more on these topics visit Dyer Consulting Group
Passion – A Key to Your MLM Home Based Business Success
As a veteran network marketer and business owner who has walked the trail of tears, I am weary of the lies and deceit that pervades the industry.Too many people join a MLM home based business based on the promise of wealth and fortune alone. They enroll with the simple idea that all they have to do is “sign up three who will get three who get three”. The concept sounds so simple that they jump right in, and after a short period of time, quit because “the system” didn’t work for them.While MLM home based businesses have various compensation plans, the traditional MLM model of “three who get three who get three” is an example I am using here. It is a simple business model that looks easy to do. Simply, it is a business template that a company implements to help the company’s representatives market the company’s products and grow their business. The process of building a MLM home based business requires much more effort and desire to succeed than is seen on the surface.While it’s true that there is potential to make a lot of money in this industry, it is also true that it takes time and effort to envision the opportunity as an ongoing journey. When people join a MLM home based business solely because of the promise of wealth and fortune, it doesn’t take long before they are checking out and are never heard from again. The reason? Greed is not a long-term motivator. Most want to get rich quick and when that doesn’t happen, they quit.A Key to SuccessIn my opinion, a key to succeeding in this industry is having a strong belief and passion for the company and its products or services.It’s interesting that many sales training books don’t elaborate on the need for belief and passion to succeed in business. I believe all of the attributes of a great sales person are backed by a passion of some type. In our case, passion is an intense, extreme, or overpowering feeling for a cause represented by the company’s products or services.The authors of sales books talk about having the right mental attitude – that is, desiring, to succeed, setting goals and achieving them, and becoming a great leader. How do you find the drive to enact these without a passion for the MLM home based business – and its products – you have chosen to build? For example, how can you have a positive mental attitude about your business without having a belief and passion for it?Too many people are brought into a MLM home based business because of the promise of an easy business to do and a ton of money to be made in a short period of time. Oh, the products and services are presented, but the major push is on the big money that can be made.The challenges we all faceWhen beginning a MLM home based business, so many challenges lie ahead. Here are just a few that a new owner may confront:
· Complacency – many new business owners never get started. They are afraid they don’t know enough or don’t know where or how to start
· Anxiety and fear about sharing the business or the products and services to people, including friends and family – becoming a secret agent of the business. What will they think about me?
· Fear of rejection – a “no” for some people is a nail to the heart. They would rather sleep on nails than be told “no”.
· Fear of failing – nobody likes to lose. A few “no’s”, and the very thing that’s feared actually becomes reality.
· Negative self-talk – that inner voice saying, “I told you this wouldn’t work. What were you thinking, joining this business anyway?”
· Lack of strong leadership – another reason many people fail in a home-based business. No leadership and guidance means trying to do something that has never done before and doing it right the first time. That isn’t likely to happen.
· Giving up – it doesn’t take long for the new business partner to say, “Maybe this business isn’t for me. It just didn’t work out.”When a person starts a MLM home based business for the wrong reasons — primarily greed, wealth and fortune, and the desire to get rich quickly — then all of the aforementioned factors will have an adverse affect.When enrolling because of belief in the company, the MLM home business owner often has very positive experiences with the products and services offered and becomes a passionate evangelist for those products and the company. Add to that a strong leadership team that keeps the business owner plugged into the latest news and product information; teaches solid skills training; and consistently gives positive feedback and encouragement, a strong belief and passion slowly will begin to develop. This will go a long way in enabling endurance for the many challenges that lie ahead.Passion will make a differenceLook at what can happen when belief and passion for the products and services are the key reasons for signing up for the MLM home based business opportunity:· Because belief and passion are so high with the products and services, the business owner is compelled to share them with friends and family; thus, no longer operating like a secret agent.
· When belief and passion are the driving forces within the business owner, complacency no longer exists. Likewise, issues that once were barriers to getting started are now banished.
· Knowing that the fundamental purpose in any business is to “show and tell” the company’s products and services, the business owner understands that everyone does not have the same feelings about what is offered; everyone is not the niche prospect. He markets accordingly, letting the prospect be the one to decide if the products and services are right for him, and knowing that a “no” to the offer is not a personal rejection.
· Understanding that the mission of sharing the business and the difference it can make in the life of another person, the business owner discovers that the fear of failure and negative self-talk disappear when leading with passion.
· No matter how slow the start, the business owner understands that quitting is not an option, that owning a business is a long-term mission and there’s no challenge too big to conquer.In all of the years I have been involved in MLM home based businesses, I have yet to see anyone climb to the top of the mountain and stay there for the long-term without a belief and passion. Oh, yes, I have seen people — through the passion of getting rich quickly — climb to the top, but it is built upon greed and not upon sound principles. Their business is built like a house of cards and in a short period of time, many fall apart.It is imperative that anyone desiring to build a MLM home based business for the long run must have a passion for the company and its products and services. That passion will attract others who also want to be a part of the marketing campaign. They, too, will embrace the owner’s passion, and this will drive them to success, too.Check out the top leaders who have been with a company for many years. Their passion for what they do will be evident. It is rare to find anyone at the top for any length of time just because they saw the money.So, it is necessary that a potential home business owner — before signing up with any MLM home based business — must research the company to make sure it is all that is written about it. It is essential to use the products and services for a period of time to make sure that there is a positive experience with them. Check out the leadership and make sure they have the experience and a system that will insure success. And, finally, a potential MLM home business owner must ask himself if this is a business that he can believe in and could eventually have a passion to build.It’s only when the answer is “yes” to these questions that signing up and becoming involved with any MLM home based business opportunity should even be considered.Too many people get into this industry for the wrong reasons and that is why they fail. Joining for the right reasons will make a huge difference in succeeding or failing. Passion is a key reason for successful growth in any business – either a present one or a future one.
Explaining What Is Debtor Finance
The average business commercial payment time frame is currently around 60 days, a statistic which has steadily increased over recent years. A business trading on credit terms with other businesses, will over time accumulate a substantial asset on its balance sheet called Accounts Receivable, or Trade Debtors.Debtor Finance is a broad description which describes a type of finance which uses trade Receivables as security for a cash advance. In technical terms there are a variety of legal models for debtor finance. In some situations it is structured simply as a loan, with the Receivables asset acting as security, much like a home mortgage.On the other hand, factoring usually involves legal ownership of the debts passing to the financier, possibly on an undisclosed basis – i.e. the debtor is not informed – or more often fully disclosed where the debtor is made aware of the financing arrangement.When debtor finance is in the form of a debt factoring arrangement, the cash advances available can be flexibly adjusted according to a percentage of debtor sales which provides a high level of convenience for a business which is expanding, and needing more cash to do so.Security Requirements of Debtor FinanceAll debtor finance arrangements carry some security requirements, firstly directly over the Receivables, but also possibly (less desirable from the borrower’s point of view ) supported by collateral assets and/or personal guarantees.As with other forms of credit which are linked to the value of the underlying security the amount borrowed or financed will depend on the asset values. Typically debtor finance funding is permitted for about 70% to 90% of the value of the debtor invoices.Advances and Cash FlowsA factoring arrangement which involves the financing of the entire debtors ledger, can effectively operate just like an overdraft. This means that within the overall financing limits, and taking into to account such factors as bad debts when they occur, the borrower can effectively draw and repay any amount at any time.Smaller financing arrangements which include Invoice Finance or Invoice Discounting arrangements will generally split the financing into two cash flow lumps:
The first lump is the advance, for 70% to 90% of the invoice value
The second lump is the balance, from which the financiers recovers fees.
Each financing method has its pros and cons. Financing the entire debtors ledger will usually involve some contractual commitments for a period of time, at least 6 months, often a year or more. Invoice finance on the other is generally shorter term, and may not require a fixed term commitment. Invoice finance be very flexible when used on an ad hoc basis, helping to keep costs down, but closer monitoring of actual cash flows would normally be necessary.When Is Debtor Finance The Best Option?Debtor finance is most useful for a business which has relatively long cash conversion period, when compared to the cost of its major supplies. This is best explained by way of example: Simplistically if a business has to pay all its bills in an average of, say 21 days, yet the settlement terms of most of its customers are 45 days or more, then expanding the business will always absorb more cash than is available from the business in the short term.This kind of cash flow stress most often arises in manufacturing companies, wholesalers and labor hire companies; in effect any business where the cost of sales is made up to a large extent by labor costs, and/or inventory.If other sources of finance are not available, or are more expensive, then reaching into the company’s balance sheet for a debtor financing arrangement can release cash to the next project or job, while valued customers can still take advantage of their normal payment terms.