Archive for

The Best Ways to Finance Your Small Business

The past few years have been difficult for small businesses, to be sure. With the economic downturn, sales have been slower and growth has been halted in many industries. Further, the credit crisis of 2007-2008 has made financing a business even harder. Fortunately, the years ahead look promising for small business financing. Below are the leading ways to secure financing for a small business:

Angel Investing & Venture Capital

Angel Investing is the process whereby a wealthy individual provides funding to a company in exchange for equity and sometimes debt as well. There are professional Angel Investors, or the could simply be an acquaintance of the entrepreneur. Venture Capital is largely the same process, but on a larger and more sophisticated scale. Usually, venture capital firms create “funds” from investors that they use to invest in young companies or startups. While Silicon Valley is notorious for getting the lion’s share of venture capital, there are also many VC firms and individual Angel Investors that work in industries other than technology and are based outside of Silicon Valley. For a new and unproven business, it’s virtually impossible to secure bank financing (see below) and venture capital or angel investing are the idea choice for a young startup.

Bank Loans
As mentioned, bank lending was been tough on businesses during the credit crisis, and it’s still very difficult to find easy credit available in the financial markets. However, for businesses in strong financial positions, with plenty of assets, lending is starting to gain momentum once again. The Small Business Administration, see below, can make a major impact in the availability of credit for small businesses.

SBA Loan Programs
The Small Business Administration doesn’t directly make loans, but they guarantee bank loans for qualifying enterprises. This has a number of benefits. The added security to the lender makes the terms and interest rates much more favorable for the business. In 2012 and beyond, SBA Loan Programs should see strong activity.

These are the primary formats of securing financing for a small business, but there are many others (including combinations of the above), and all available options should be considered by the business or entrepreneur before making a final decision on how to finance the business. Typically the best financing choices are as follows: Angel investing (for a brand new idea), venture capital (for a growing startup), SBA loans (for young but thriving businesses) and traditional bank loans (for the mature and growing company).

What Is Small Business Finance Software?

One of the best ways of staying organized and being ahead of the game in your business is the ability to track your books. Small business finance software can help you do just that! Financial software is a term used for a collection of programs that help you to manage the financial records of your business. These programs aid in managing the flow of transactions such as inventory, accounting, payroll, taxes, etc. In addition, to keeping tabs on your business financials, financial software for small business ensures that you comply with IRS regulations. It also helps to simplify your life by making those “daunting” accounting tasks less stressful. Additionally, you as the business owner are able to always have financial information at your fingertips in real time. This means that you ‘re constantly in the know of what’s happening in your business by staying abreast of the money that’s flowing in and out of your business.

The types of financial management software at your disposal are plentiful. Below is a list of the most common financial programs used in smaller enterprises:

Small business accounting software – a business management tool which keeps record of all accounting transactions. Provides the ability to manage invoices, bookkeeping, accounts receivables, accounts payables, inventory, payroll, financial reporting, all in one program. Some even have the capability of business budgeting and cash flow management as well.

Small business bookkeeping software – is software that helps you to effectively manage the financial tasks that you would perform in your business every day. This includes data entry of cash receipts, invoices to pay, sales and expenses tracking, banking and credit card transactions. Some provide the functionality of integration with your current accounting software.

Small business payroll software – provides the ability to manage employee payroll services. You can manage hours, taxes, tax compliance, direct deposit of employees’ pay and much more. Many can be integrated with your accounting programs.

Online Accounting Programs – provides the same functionality as other accounting programs, but in a secured web-based environment.

Small business tax software – software used for preparing and filing small business taxes. The more updated tax programs have step by step instructions and ask appropriate questions to ensure that you take advantage of every business tax deduction. Some also provide the functionality to incorporate your personal taxes.

Financial Software downloads – download software from the internet that will help in managing the finances of your business. Some are free and some are reasonably priced.

Consider simplifying your business finance and your life with small business finance software. You can save money, time, and frustration by moving to an automated financial management process utilizing software.

Small Business Finances – Accounts Receivable Factoring

As many people know, owning and operating a successful small business means keeping accurate and timely financial records. Why? Because your financial picture allows you to monitor your small business and determine its successes every month. Good record keeping also provides you with the information you need to evaluate the financial decisions that you’ve made.

Many small business owners think is that they have to hire an outside accountant to run their business. This is not necessarily true. Consider the fact that you could save money if you or someone in your company or family were to keep the books, rather than a costly outside accountant. An accurate set of financial records in-house will minimize costs of paying an accountant and enable you to have more control of your business finances.

For example, what if your clients are late paying you one month, and you need more money to pay bills? Then you would know right away that you might consider factoring, a solution that could provide funds in about 24 hours. Invoice factoring, or accounts receivable factoring, has been around for 4,000 years, but single invoice factoring is a great new way to provide short-term working capital for growth.

You might not always get paid right away for a product or service that you have already delivered, so factoring could be the answer. Today it is harder than ever before to secure alternative financing through banks or venture capitalists. Accounts receivable factoring, also known as spot factoring, is a fast way to turn your receivables into cash rather than waiting up to 90 days for an invoice to get paid the funds.

It works like this. A factoring company will take a long look at your client’s credit, instead of yours, then if approved, you will get paid in around 24 hours. Fees for this service vary. Factoring companies collect the funds from the customer.

Financial tips for operating a small business includes the fact that it is important to keep your records including canceled checks and other business documents in an orderly and safe place. It’s important to place your receipts in the proper categories during the year, so it will be easier at tax time.

Small businesses aren’t required to keep a formal set of books, but make sure you choose the best record keeping system. Here are a few more tips:

- Employee compensation records — make sure you keep tabs on what you pay your employees and when raises, bonuses or commission checks are due.
- Expense summary — keep records of your monthly business expenses.
- Bank statements — when you receive your statements every month, be sure to prepare a bank reconciliation document to help you balance your checkbook.
- Summary of receipts — keep a record of gross income that is totaled daily, weekly or monthly, and keep track of where the funds came from.
- Disbursements record — this is a check register or expense journal that shows payments of bills where you record all the transactions in which you paid out cash or checks.
- Asset purchases — keep a listing for equipment, vehicles, or real estate that is used in your business.