Smart Financing

What defines a smart financing is the ability of an entrepreneur to personally finance the business and spend it in the right way. Everybody can personally finance the business but not all can do it in a smart way.

If there’s a capital, people tend to buy things that they really don’t need for their business. Entrepreneurs are often putting investments on things that they do not understand. This will lead to financial injury and you will just wake up one day with a lot of debts and eventually loosing the business.

You can avoid this kind of scenario if you will start smart financing. Here are the tips that you can follow for a better and smart financing:

1.Stay away from debts

As much as possible, avoid debt at all cost. If you will not take any financing, you will surely have a smart choice of financing. Start your business at the level where you can afford. You can start small to avoid debts. If you really need to borrow money, consider borrowing from friends and family.

2.Use the Technology

You can have smart financing by using internet technology. If you are buying equipments and materials, you can use the internet to compare and determine the most practical and affordable pricing. You can also read on online forums for tips and advices from successful entrepreneurs. You can also use the internet to research and study on what you are investing to understand it better.

You can implement smart financing in your own little way. If you can manage your finances and ensure that every cent is being spent wisely, you have a good financing strategy.

Tip Number 5 to Impress your Lender: Show that your Business can Pay the Interest Plus the Principal

The possibility of getting approved for loan is greater when you show confident that your business has the capability of paying the interest. However, lenders these days are becoming more cynical. They are not only looking at how the business can generate enough cash to handle the interest but also if it can pay back the principal amount.

The tip here is, show to your lender that you are able to handle the total debt coverage. You must ensure the lender that you can not only pay the interest but the principal as well. It is not enough to say that your business can handle the interest because the lenders are more concern with the principal amount than the interest. Boost out your sales and your future prospects and be confident to show that your business has the capability to generate sales which can cover the total debt. It is also a plus if you can show that aside from the capability of paying the total debt, there is also a profit generated to keep the business rolling.

Tip Number 4 to Impress your Lender: Improve your Loan-to-Value Ratio

Getting business financing is just like searching for a pot of gold at the end of the rainbow. It is somehow difficult and challenging. You must invest on your effort to please your lender to get the business financing you needed to start your business.

One of the best ways to impress your lender is to improve your loan-to-value ratio. This may vary according to your industry. Industries such as leasing companies are more often have higher acceptable loan-to-value ratio than any other industries.

Business lenders would always want to see business that has the capability to stay strong despite the economic recession and other economic challenges that may come along the way. At first glance, your business should the impression of strength. You do not need to be famous, as long as you show to your lenders that you have enough weapons to go against the storm, you will surely be granted of that business loan. Your business value should be equal or more than the value of the loan you are asking.

Tip Number 3 to Impress your Lender: Boost Your Asset’s Value

You must be aware that lenders care too much about the worth of your assets. The lenders always look at the difference between the amount you loaned and the value of your asset. So if you are planning to get a loan, you must boost out the value of your asset and ensure that the amount you are asking corresponds or even less than the worth of your assets.

Your business should show the value that lenders are looking for. They are not after of how capable you are of paying your loan, they are more concern of what they can be sold for if the business is to be liquidated.These assets should as much as possible not depreciating. Whatever assets you have right now, you must be aware of the standards of the lenders and plan accordingly.

Be confident of the value of your assets and present it well with your lender, boost out your business worth to get that business financing you needed

Tip Number 2 to Impress your Lender: Clear Your Financial History

If you are trying to impress your lender, you must clean up your accounts receivable and accounts payable. Make sure that you don’t have any stain with regards to your financial history. If there’s any, clean it up before facing your lender.

The thing is, most lenders do not want to see business waiting for a lots of money to come in. They just found it messy and unorganized. Whether it is in the form of accounts receivable or accounts payable, lenders would just like to see your business with clear financial history. If the lenders saw that your business has a lot of accounts receivable and accounts payable, they will think that there is a problem.

Accounts receivable may reflect slow-paying clients. For lenders, the capability of the business to pay for their loans relies on the paying clients. Now, how can a business pay their loans if they have slow paying clients? The lenders would still like to see a reserve for bad debts to reflect potential uncollectible bills.

Tip Number 1 to Impress your Lender: Be Organized

In order to give good impression to your lender, you should make yourself look organized even though you’re not. It is not being hypocrite, but you need to do that to get that loan that you will need to run your business.

The thing that will really impress the lender about the borrower is a well-organized package. You should exert an effort to organize things. Lay down all the information needed like the financial statement, listings of receivables and payables and insurance records. You should show all the properties and the equipments that your company owns and the cash flow statement.

Give your lender a well-organized package and they will surely treat you as a sophisticated client who is running a business with professional touch.

The Right Business Financing

It takes an inspired vision for an entrepreneur to start a business. To materialize the vision, the entrepreneur should have the finest strategy to find the correct business financing. When we speak of business loan, this has some negative connotations from the business owners as it represents liability and financial responsibility. However, if the business is operating right, business loan is indeed a real savior of developing small business. When your business is on the verge of rising productivity, it is important for you to have a sufficient fund to satisfy the demand of your growing production. In fairness to business loan, it always delivers precision to the promising entrepreneurs. It is not always a liability. There is no such thing as ideal business financing. Even the finest laid strategies in obtaining business financing go skewed sometimes.

There are a lot of options intended to generate a working capital in starting a small business. Looking for the best business financing option is just like looking for a needle in a haystack. If you nailed it right, you will be trudging the right path towards the successful business venture. The success is actually not dependent on the business financing package. It is on how you disciplined yourself to use this capital properly. The old cliché still applies; it takes money to make money. Business loans are still intended to put money into your pocket. It should increase the business profit other than a financial responsibility. It can only be a profit if you have designated and planned the right way of using this money.

Alternative Business Financing

A conventional bank loan is not the only source of small business financing. "It's a very good opportunity right now for small businesses to seek financing, and there's a lot of unconventional forms of financing now," says Jonas Cohen, managing director of Fuller Landau Consulting Ltd. ("Taking it to the bank ... or not", Eric Lam, Financial Post, Aug. 11, 2009).

What are these unconventional forms of small business financing? Mr. Cohen discusses three:

* an asset-based loan where your inventory is used as collateral;
* contract financing, where the lender finances a purchase order instead of the manufacturing process prior to purchase and gets an agreed-upon cut of the profit when the transaction is complete;
* or using a sale-leaseback transaction, where you sell your business property to yourself, a holding company or an investor and then agree to a long-term lease to retain the use of the site.

The above is quoted from Susan Ward's post at about.com about other alternative business financing that we can consider too. Check out more about this post here - Small Business Financing Options You May Not Be Aware Of.