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Is Your Business Coming up Short in the Cash Department?

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Man using scissors to remove the word can't to read I can do itRunning your business might seem at times like more challenges than it is worth.

That said always remember why you likely got into business in the first place.

For many business owners, it was to grow something they created, allowing them to be their own boss and make some money along the way.

Ah, the money part.

In many instances, it is the lack of money that leads one to have to close down their businesses sooner rather than later.

So, take a look at your business operations to see if you’re in fact coming up short in the cash department.

Meet Financial Challenges Head-on

So that you can meet any financial challenges head-on, remember these tips in running your own business:

  • Don’t get in over your head financially – The biggest risk one takes in starting and running their own business is getting in over their heads financially. As an example, someone wanting to open a small eatery takes out a significant loan, not to mention taps into some of his or her savings, perhaps even gets family or friends (see more below) to invest in this dream entrepreneurship. In doing so, they must hope that the establishment does well sooner rather than later. In the event it does not, they could find themselves in severe financial difficulties and not even turn a profit along the way. If you are in need of fast cash for your business, it is important that you check around to see which establishment will give you the best deal, that is a deal that does not leave you handcuffed when it comes to your overall financial health. In the event your business is doing well and it might be time to expand, the same rules of commonsense apply when seeking cash. Always make sure you do your research before settling on a financial establishment to provide you with the cash infusion your business needs;
  • Family and friends – Some soon-to-be or struggling small business owners are inclined to turn towards family and/or friends for a financial investment in their business at some point. So, is this a smart or bad decision to make? On the plus side, you know where the money may be coming from. There is also more likelihood that someone close to you is not going to charge you an arm and a leg in possible interest fees. On the down side, there is always the possibility that such a financial arrangement could curtail a close relationship in the event things go bad and/or you are slow to pay them back the money they loaned or invested in you. Even when it is someone close to you, be sure to draw up an official contract when an exchange of money takes place. In doing so, you acknowledge that the person or persons have loaned or invested money in your business, just as a financial provider would be doing. If something goes wrong, it is imperative that those who helped you get all of their money back;
  • Recognize red flags and react – Finally, just about every small business goes through some ups-and-downs along the way. That said it is important that business owners know what red flags to be on the lookout for. A nosedive in the overall economy can be the first harbinger of bad tidings to come. Keep in mind that when the economy heads south, consumers typically have less money to spend. With less money to spend, they are less inclined to go on buying sprees. For example, if your small business is running a small eatery, one of the first things consumers typically cut back on when the economy is down is going out to eat. Another red flag is when food prices start to going up rather quickly. Lastly, if your health insurance costs to cover you and your employees suddenly explode, this can be another sign of trouble on the horizon. Always keep your ears and eyes focused on the overall economy and what is happening in the real world.

Running a small business is one of life’s greatest dreams for millions of people.

If you are one of them, do you have the business savvy to make your cash flow?

Photo credit: BigStockPhoto.com

About the Author: Dave Thomas covers business topics on the web.

Will Securing Funding for Your Business Venture Be Difficult?

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Among the most frequently asked questions for those interested in starting a business is, “Is it hard to secure funding?”

The answer will depend on a number of factors.

Credit ratings will effect people trying to get a loan. If bad credit is a factor, securing funds will be harder than for someone with a good credit history.

It is harder now than it was before 2008 to secure a loan. Lenders are more stringent with loans and securing credit is harder for those with less than stellar credit ratings.

Family Loans

Loans from family members have started many a successful business.

These loans can often be paid back at a slower rate than with non-family. Relatives aren’t always interested in charging late fees or interest to loans.

This isn’t true for every situation, but for the most part, family loans are the easiest to repay if a business is successful. Most loans of this nature are small, though there have been large loans from wealthy family members. The larger the loan, the more likely the relative is to treat it as a ‘real’ loan.

Full Time Jobs

Quite often the best way to secure funding for a new venture is to make the money yourself.

When you are working and saving money toward your own business you have no loan to repay. This route will typically take much longer than taking out a loan, but the reward is knowing you have no creditors.

Some people that take this route become consultants and work on their product on the side. They develop the product for the people they are offering consulting services and then change their business model at a later date to sell the product they’ve created.

Angel Investors

Angel investors are individuals that offer funding to start ups.

These people are wealthy and invest in new businesses in order to help them grow. While this sounds appealing, most angel investors will expect a return on their investment. This means you must create a product or service that sells well or a company that is good enough to merit another larger company buying it.

Not every new business owner will want to sell what they think of as their ‘baby’, so keep in mind that angel investors look for start ups that will turn a profit through sale of it or many sales of service/product.

Funding Companies

There are companies that work in essence like angel investors.

These companies are seed funders and also venture capitalists. The former offers small amounts to new companies, literally seeding it with capital. Seed companies offer advice to brand new businesses which is a boon to new owners.

Venture capitalists offer large amounts, hundreds of thousands, sometimes millions to new business, but these are better reserved for someone that has started a company in the past with good results.

There are many ways to fund a new business.

With careful consideration choosing the one that is right for your new business will become clear. Consider the stage of planning or start up you are in, how much funding you need, and how far you plan to go.

Photo credit: capitalcabin.com

About the Author: Tina Samuels writes on ways to accept credit cards online, social media, healthcare options, home improvements, and small business solutions.