Key Points Entrepreneurs Should Know about Small Business Finance Transactions

There are entrepreneurs who start their businesses with the purpose of seeing their ideas come to fruition, to prove their worth and make a profit on the side.  Unfortunately a lot of them rush into making business loans without reading the fine print.  This may be because they were never into finance in the first place or that they find money matters a little too trivial compared to “the next big thing” they have up their sleeve or that they are just too eager to start the business, they will accept any deal being offered them. 

The truth of the matter is that there are a lot of small business owners who discover that they could have done things differently when it comes to their small business finance dealings.

Total Loanable Amount

The estimated budget for any business project should at least fall well within the value of the collateral and not substantially below it.  If the small business finance facility does not require collateral, then the loan amount should come close to what is needed and it is important not to go overboard either. 

Revolving Credit Line

Remember that you still pay interest on and excess cash from the loan. If you wish to have a revolving capital and would want to pay interest only for the loan amount actually being used get a credit line facility instead of a lump sum loan.

Penalties and Surcharges

Small Business Finance services have fixed interests, which are what you pay for the temporal use of other people’s money. But before signing and agreeing to anything, pay close attention to the penalty rates and surcharges.  Everyone thinks positive and hopeful at the threshold of a new venture, but the wise prepare for any eventuality.  Inquire about the extra charges in case you fail to meet an amortization deadline. Let the reality sink in first especially of the collateral is something you value.

Amortization and Interest

When aspiring entrepreneurs are presented the initial computation for the small business finance facility, they tend to look at the monthly amortization often ignore the total debt amount. It is usually presented by the small business finance provider after the loan is approved and the documents and promissory notes are prepared for signing. Remember that if the loan interest is at 2% per month, it is 24% a year and 96% in 4 years. That is almost double the amount of the loan amount. 

Alternatives

Small business finance sourcing do not have to come from traditional financing institutions.  Inquire about Merchant Cash Advances, Business Cash Advance and Unsecured Loans.  These alternative financing models may be better suited for your needs. 

How to Sell a Business – Steps To Make a Profit

Business owners sell for many reasons and somehow, these reasons correlate with the possible outcome of the business sale.  For the most part, reasons are personal such as retirement, health issues, partnership problems, relocation, being burned out and still others who just find that there is another more profitable or challenging venture.  Whatever the reason is most people who sell a business wishes to sell at a profit – the bigger the better, of course. 

Step 1.  Determine the value of your business.  Knowing how much the business is worth is a good starting point.  It will also give you an idea if you can sell a business as it is or if you can make changes to improve the value. You will need an accountant and a financial adviser.

Step 2. Prepare for the sale. Based on the valuation and advice, start cleaning house.  Do the necessary improvements from operations, structure, and financials. Prepare documents – bank statements, financial statements, client lists, supplier lists, inventory lists, lease documents etc.  It is a good idea to bank all sales to boost cash flow profile even if it means you pay higher taxes.  Higher verifiable profits add value to the business.

Step 3.  Put together long term business plan that includes a marketing plan.  When you sell a business, you need to present a profitable future for it.  It gives prospective buyers and their investors a positive perspective.  Remember that they do not value your business the way you do.  You may be proud of where it has been and its performance means a lot to you while buyers put weight on its potential profitable future.

Step 4.  Choose a business broker with a marketing plan.  Do check credentials and referrals, however, when interviewing for the right business broker it is important that the business broker is able to present his marketing strategies and timeline.  Ask how he will be able to ensure confidentiality and at the same time advertise the business to the right buyer. Inquire how long it usually takes him to sell a business.

Step 5. Choose your buyer well.  Your choice will depend on what your goal is. Is it profit or the assurance that your business will continue as you wish it to?

Step 6. Be prepared for the sale.  When you sell a business, be emotionally ready too. Work out the possible negotiation issues with your business broker, lawyer and financial advisor.  Aim for a smooth exchange of ownership. 

Small Business Finance – How It Can Work For You

Most small businesses start with some form of small business finance facility, often drawing collateral from the owner’s personal assets.  Because of this, most owners pay closer and more personal attention to their businesses. It is also for this reason that most small businesses are single proprietorships. However, access to small business finance facilities is much more difficult for a small business.  Conventional financing institutions such as banks find that small businesses have very low survival rates and are therefore high risk clients.  This is no cause for despair h however, because there are alternative ways to get the needed funds.  Business cash advances and small business loan without collateral are just two types of small business finance facilities that are easily accessible and features a lighter payment scheme.

                These newer funding facilities do not require business plans or extensive financial statements and near perfect credit scores but they do evaluate their applicants based on capacity to pay and the current market conditions.  It is up to you to determine how much you need and how much of your profits you are willing to part with. This is why a closer analysis of your cash flow is as important to you as it is to the financiers. Understand that you have to add another cost to your operations which is cost of money. 

                It is also crucial that prior to applying for and small business finance facility, you have already determined the loan amount that you will require.  It is a mistake to underestimate your funding needs.  It is better to give allowances than end up with an incomplete project, which could translate to loss of profits. 

                It is also not a good idea to overestimate the funds you need.  This could add unnecessary burden to your business and put a strain on your cash flow.  The higher the amount borrowed equals higher cost of money, a cost that does not generate income.

                Small businesses tend to renew their loan account after a complete loan cycle.  This is why it is important to review the business’ performance before the loan cycle ends.

                Small business finance is about helping small businesses overcome the challenges of daily operations, the hurdles of innovation, research and much needed marketing to boost sales and market presence.   Financing companies recognise these needs and have found ways to make access to funds easier and even easier to repay.  Growth for small businesses also means the growth of the institutions that finance them.  

Five Reasons Why You Need Business Brokers

Not all business sale transactions conclude with a positively profitable outcome for everyone.  But when they do, it is because the business broker did his job well and at a timely manner.  When it is time executing your exit strategy, it is much more advantageous if you let an expert work with you.  It ensures smooth transactions from start to finish, with an outcome that you are very happy with. 

1.       Business Brokers can help you prepare your business for sale.  Because they have the experience, you can benefit from the advice they can give you.  This will help enable you to reach the full potential of your business as a viable business venture that is attractive to Sydney’s buying market.

2.       Business Brokers have access and insight into the Sydney business market.  There are hundreds or even thousands of businesses up for sale and there are enough buyers that are interested to buy.  The tricky part is to match the right buyer to the right seller.  This is an insight to which business brokers are privy to.  Selling your business without a broker may very well end with an unfavorable match which could end in regret.

3.       Business Brokers close deals in time. The amount of experience in the Sydney business sales market allows business brokers to breeze through the whole process in record time.  This is because they have streamlined the work and have already eliminated unnecessary steps.  

4.       Business Brokers already have a network of people required to close the deal. This is one of the reasons why business brokers are able to complete transactions in time aside from direct access to the market. They already have a network of trusted lawyers, accountants and consultants.  They also have a good relationship with Sydney’s financial institutions. Building this network and forging this level of trust takes time.  The good news is that you have access to this network if you sign up with a Sydney business broker.

5.       Business Brokers have the negotiation skills needed to get the best terms. Skills are learned and perfected over time and it is the same with sales and negotiation skills.  Sydney’s market is as diverse as its population.  Negotiations are based on the needs and goals of both buyers and seller. Coming up with the best terms for both parties is seldom achieved without the expertise of a business broker.  It is his job to “sell” your business and make it look good for the buyer; it is also his job to close the deal without compromising your projected sales.

Business Cash Advance – How it works

Small businesses need funding as much as big corporations does but the business loan models that work for big corporations usually are not applicable to the needs of most small businesses.  There was a time when financial institutions like banks and credit unions process most business loans universally. A large portion of the existing small business and startups’ funding needs are not met, others are overburdened by the monthly payments and tight policies that they have no choice but to close down. 

About a decade ago, the business cash advance loan structure was introduced and while it was met by much skepticism by economists and financial analysts.  Small business owners however, found that it was just the right kind of small business funding that they require.  The business cash advance is similar to a payday loan but the process is tailored specifically for small businesses.   For one, the application and evaluation process takes days and not months and the minimum amount loanable is manageable enough for any small business to handle

What is usually required?

While the business cash advance facility is design to make access to funds easier and faster, there are a few qualifications in order to make the whole process work.

·         The business should have an EFTPOS (electronic funds transfer at point of sale) to process payments.  Should be able to accept major credit cards or preferred cards by the financing company. This is needed because the payment is made on a daily basis through the debit/credit card processors.

·         A minimum monthly credit card or debit transactions. This rate varies depending on which business cash advance provider you approach but it is usually somewhere between $5,000.00 to $10,000.00 credit card/debit card sales per month. 

·         The business should be operating for a minimum of 12 months. This allows the provider to assess cash flow and allowable cash advance amount.

·         The usual businesses that may take advantage of this type of funding source are those who transact daily such as restaurants, retail stores or gift/novelty shops, bakeries, salons etc.

How it works

Approval is usually within a period of 5 to 14 days, and the business owner is given a lump sum which may reach up to 100% of the total monthly sales.  There is an agreed percentage which is automatically deducted from the daily sales and payments are automatically debited to the business cash advance provider’s account.

There is no interest rate, no fixed payment term or payment schedule.  The length of the term will depend on your sales.  The higher the sales, the faster the “loan” gets paid.   

Preparing To Sell Your Business to the Right Buyer

So you have worked hard and are very proud of the enterprise you have established.  For people like you, the business is already a part of who you are and a point of pride.  The decision to sell the business will have an entirely different from someone who wishes to sell for a profit. For people who are considering retiring and selling the business is the only option, it is a good idea to prepare the business in order to attract a wide variety of prospective buyers.  The more prospects you attract the better chances of finding the right person to take your place. 

·         Make yourself obsolete – Make sure that the business can run on its own.  Standard operating procedures should be in place and the best way to do this is to document everything.  Documentation is a very useful tool in daily operations, whether it is manufacturing or trading or in sales.  There should be an existing database from clients to inventory or just how things are done.

·         Make sure your financial documents are up to date – Businesses are evaluated based on numbers.  Most buyers go straight to the audited financial statements and as a seller; you have to make sure they are as attractive as it can be.  There are businesses that minimize their taxable profits but while it may be good for your business, it does not give the buyer an actual picture of how your business is doing.  So prepare your financial portfolio 2 years ahead of time and start recording your actual profits.

·         Create a business plan as if you are not about to sell it. – This gives your buyer a better view of their future if they decide to purchase.  If you have this ready, it is easier for them to decide.  They may make their own feasibility study but your input will definitely speed things up.

·         Feature your core values in your business plan – if you really want to attract a buyer who share the same principles as you have established, this feature in the business plan is sure to attract the ones whose business objectives are aligned to yours.  This would ensure a better transition a as if management and ownership has not changed especially if you wish to secure the tenure of your existing employees.

·         Sign up with a business broker who values your objectives as much as they value the sale - You should keep this in mind especially if you are selling primarily to ensure that your business is intact when you retire.  Letting go difficult but if you know you are leaving everything to the right people, it would not be such a big deal at all.

What to Expect From Business Brokers in Sydney

 

So, you’ve decided that it is time for a change and selling your business is on the list of changes you need to make.  Although Sydney is a densely populated city of about 4.3 million residents, there are probably thousands of prospects for your business, it should be top priority to look for the right business broker to market your business for you.

Sydney is New South Wales’ business center and you will probably find quite a number of them and the choice would probably be a tough one, unless you know what to expect from them. 

·         You know you are talking to the right people when they are open with their marketing approach and are open to give you advice on how to prepare your business prior to selling so you can get the best possible price for your business.

·         Successful business brokers take time to know you and your business before even asking you to sign a contract.  This is how you know that they want to try and sell your company based on its value and not on the basis of the current buying offers.

·         Companies that guarantee a sale within a certain amount of time may seem too good to be true, but there are business brokers who offer this.  They do so because they have a proven system for marketing and selling businesses and they know the Sydney business market well.  They also guarantee that the agent they assign to you is able to do his job 100% of the time which is to sell your business.  Business sourcing, marketing and enquiry handling is handled separately by someone else. 

·         Successful business brokers in Sydney are most likely to have a comprehensive database on the potential buyers, sellers and list prices.  This means they have a baseline on where to go and who to start calling for possible leads.  Their network and relationship with the market is well established that sales go smoothly and in a timely manner.

·         Confidentiality is also one of the more important qualities in business brokers that should be expected.  Ask the business broker how they ensure that everything is kept confidential during the whole selling process.

The main goal in selling any business is to get the best possible returns for the business you worked hard to establish, and to ensure that it continues to grow is how you and your broker choose the buyer. It is therefore crucial that the business broker you hire has the capacity to get you the best price as well as the best possible buyer.