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Rule of Four – What You Need to Know About Small Business Financing Credit Cards

Money is not everything. There are travelers’ checks, money orders, and credit cards. When you start your own business, there’s a way for you to obtain much-needed capital, too. This way is called small business financing credit card.

Small business financing credit card, also known as small business starter credit cards, is a great way to keep your personal and business finances separate.

Personal Credit Card Versus Small Business Financing Credit Card
In the past and even at present, lots of entrepreneurs rely on their personal credit to get their business up and running. The problem with this is that they carry the debt from their business into their personal credit cards. Ultimately, they end up hurting their personal credit scores.

This is where small business financing credit cards come in. They offer higher credit limit. Additionally, they keep business and personal expense separate, thereby making it painless to track tax deductions. More importantly, you may write off your small business financing credit card’s finance charges and annual fees.

Why Get a Small Business Financing Credit Card

1. Build Credit

A small business financing credit card is a good way to build a financial history. Your business is a start-up; it’s unknown. This makes it difficult for your business to obtain loans. A small business financing credit card will remedy this. It will provide banks with the spending footprints they need to reassure themselves you’re a responsible borrower.

2. Avoid Intermingling

When it comes to managing your expense, there’s one thing you should always do. Segregate, segregate, segregate. Do not mix business and personal transactions. This might later on create tax and money management problems.

3. Prevent Shoebox Accounting

It is always a nightmare to track business expenditures. With a small business financing credit card, however, you can turn the nightmare into one you can easily snap out of. Your credit card company will provide you with a year-end statement where you can find your transactions summarized, itemized, and categorized. With such a report available, there’s no need to keep a shoebox stacked with receipts.

4. Special Rewards

The credit card industry is so competitive providers fall over themselves to lure borrowers. Accordingly, a reward and discount program for small business credit card users was developed. Every time you use your small business financing credit card, you qualify for discounts and rewards, ranging from office supplies and plane tickets to phone services.

How to Manage Your Small Business Financing Credit Card Effectively

Credit cards, whether personal or corporate, will always be open to potential abuse. Effectively manage your small business financing credit card by:

1. Limiting card hopping

Sure, you qualify for multiple cards, but this does not mean you should sign up. You shouldn’t. This will only tempt you to overspend. It will hurt your credit rating, too.

2. Steering clear of cash advances

Never use this credit card feature unless you need to bail yourself out of jail. It comes with whooping credit card fees and interest costs.

3. Avoiding late payments

The more delinquent your payments are, the higher the fees and interest rates you would be saddled with. Moreover, late payments hurt your credit reputation.

4. Using grace

Many companies offer a 21-day grace period to clients before asking them to pay for purchases. Turn this to your advantage by drawing up a schedule of your purchases and payments.

Use your small business financing credit card prudently. Remember, credit cards should be a financial safety net, not a trap.

Surveying the Small Business Financing Landscape

Over the past month or so, there has been a noticeable shift in the dialog coming out of Washington, D.C. with regard to economic priorities, with a stronger emphasis on job creation.

As part of this emphasis, the federal government has proposed and launched several initiatives to help increase access to capital and grow small business financing. One of these would transfer $30 billion to a new Small Business Lending Fund that could be accessed by community banks.

But is a lack of access to capital what’s really holding community banks back from doing more small business financing? I don’t think so, and neither does Jim Blasingame, the creator and host of The Small Business Advocate Show, the world’s only weekday small business radio program.

“Washington says that banks aren’t lending money to businesses, and if they’re talking about big banks, they’re right,” Jim said when I appeared on his show recently. “But every community banker I’ve talked to says they’ve got lots of money to lend. Access to capital isn’t the problem-the problem is that small businesses aren’t asking banks for loans.”

A recent survey conducted among business owners and executives by Forbes Insights and CIT bears this out. Only 11 percent of respondents said they had sought new lines of credit or small business financing over the past year in an effort to help improve their cash flow. Also, just 11 percent said that their greatest cash flow challenge in the past year was difficulty in securing small business financing, the second-lowest ranked answer in the survey.

While loans are available to help well-run small businesses finance growth and working capital, there’s no question that they’re harder to obtain than they used to be.

In this environment, owners need to be more agile, flexible and transparent. Meanwhile, lenders have expanded their reporting and recordkeeping requirements, as well as monitoring of financial performance. They’re also examining collateral more closely to try to ensure that borrowers can repay their loans.

What Business Owners Are Thinking

The Forbes Insights-CIT survey revealed some interesting findings with regard to how business owners feel about their companies, the overall U.S. and world economies, and Washington, D.C.’s effort to revive the economy:

• Respondents were mostly optimistic about prospects for their companies this year, thought they were more cautious about the overall economy in general. More than half (61 percent) expect their own company’s revenues to increase this year, primarily because the recession has forced them to work harder and smarter than they ever have before.

• More than three-quarters of respondents (78 percent) believe they will have to learn to adapt and do business in new ways in order to succeed in a more competitive marketplace.

• Very few respondents believe that policies enacted by the federal government are helping the recovery. A full 90 percent said that economic stimuli does not benefit small business. However, most (58 percent) do believe that proposals to raise SBA loan limits will be helpful to small businesses.

• Most encouraging is the belief among owners and executives in the power of small business as the main driver of the U.S economic engine. Eighty-three percent believe that small businesses will play a major role in helping lead the economy back to recovery.

What doesn’t kill you makes you stronger, and this seems to be how business owners feel about their prospects for success this year and beyond. “The survival strategies that companies use during a downturn can often aid them during the resulting upswings and make them more resilient,” the report noted.

“U.S. small businesses are looking ahead to 2010 in anticipation that the ordeal of the 2009 recession may be fading,” it concluded. “Having made it through the economic trauma, business owners are hoping that the hard lessons they’ve had to face will provide them with the discipline and control necessary to help ensure their success.”

Small Business Finance the Smart Way

Are you a small business owner? If you are, you’ll know that running a small business is one of the most difficult things you’ll ever do in your life. You’re the company’s spokesperson, owner, founder, advertiser and investor. You are its inspiration. It is your livelihood and your passion. And like all passions it is all consuming.

It has you crunching numbers when you should be sleeping. It has you sketching out ideas on napkins in restaurants when you should be eating. But like any love affair the irritations are worth it. You know that almost nothing in your life can match the highs that your business gives you. So stick with it! Give your business all your heart and soul. But be sensible when it comes to your cash.

Business Finance.

Starting your business can be incredibly costly. Buying the machinery, renting the premises, purchasing the advertising space… well you get the picture, you’ve been there. You are also probably aware that the cost of kicking your business into life is so high it can affect your businesses ability to grow later on down the line.

You’ve established yourself as a great business; you know you have the ability to expand and to grow. But you just don’t have the cash to do it. But what is the best way to get that much needed cash injection? You don’t want to be taken for a ride. This is why you need to know about business finance.

Small Business Cost.

The first thing to do when you start investigating small business finance is to look carefully at what you want to achieve. Having clear goals is one of the basic rules of success in business. If you are going to borrow money to support your business you must have a clear aim in mind. That way you can easily track the success of any investment and see how much, making your small business grow will cost. So, determine what you want. Are you purchasing assets, such as land or machinery, or stock? Or are you looking to improve your market position through advertising, or expand into new markets? Whatever you’re doing be clear about your goals.

Small Business Finance.

There are two types of small business finance available to you. The first is the more traditional and common form, known as ‘debt finance’. This involves your company lending money from a financial institution, usually your bank. There are up sides to this deal, you get your cash and you keep all your business. You do have to pay more back than you borrowed in the first place, with the onus on you to repay as soon as possible.

However, if you have clearly identified a use for your money this should present no problem to you and allow you to expand quickly. This is why it is the route taken by the majority of small businesses. If you fail to pay back the money you have borrowed however the consequences are severe, as part of the agreement will involve collateral. Often, this could be your house.

A less common option is that of ‘equity finance’. Ever seen the TV show Dragon’s Den? Then you’ll know what I’m talking about. Equity finance is when an investor gives you the cash you need and in return you give him a share, or a stake of your business. As the investor has no assurances, unlike the bank, he or she requires a much greater pay off if things go well. They want some of those profits! However if things don’t work out, you won’t be sleeping in the streets!

Your Future.

So there are plenty of ways you can offset your small business cost. Small business finance is easy to get if you pitch correctly and your business is heading in the right direction. Whichever mode of business finance you choose make sure you keep following the dream and your passion might end up making you millions.

Small Business Financing – What Are Your Options?

In the meantime, one has a wide variety of options for small business financing. Fortunately, you have other resources to rely on, unlike just bank loans as it was in the past.

What are the options that are commonly overlooked?

Currently, many unconventional sources of finance are coming up as well, e.g. contract financing, which is one of the widest preferred options. Indeed, it is also known as purchase order financing. Following this option, a lender finances the purchase order rather than the manufacturer. Consequently, the lender gets the agreed portion of profit when the process is finished. This is known as purchase order financing.

What is the next option?

One more type of finance options is to think of grants for small businesses. But, one negative aspect of this option is the fact that grants are not considered that reliable. However, venture capital is one of the small business financing options that is best defined by many applicants. This is especially true since the firms, which fund the proposals presented, are from the small enterprises. The only limitation with these small business loans is that they just finance a very few ventures.

Do you have any other options?

You can avail finance for your small business by selling your debts and stocks in the mass market. But again, one thing you should know is that it is not a common method of getting any help because of its difficult procedures. A large number of small businesses are now funded with the help of debt finance through financial institutions like banks. In this context, banks provide small business owners a line of credit or loan with a repayment term and schedule, as well as, a rate of interest.

How can a financial institution make an educated decision?

In fact, financial institutions or banks will deeply look for how profitable your business is. So, to improve your chances of being financed, just prepare a good business plan. A plan will show them the prospects of your business and, therefore, it will increase your chances to get accepted.

Have you ever thought about the option of debt funding?

There are many private debt investors who invest on a small business through debt funding. To make it a win situation for them, they ask for some equity ownership stakes in return. Borrowers from any class can opt for equity options. Despite having a bad credit rating that may include bankruptcy, default, arrear, CCJ or IVA, one can apply for this option without any problem. Obviously, you will need to put in some efforts for making these financial deals cost effective.

What is the best choice that I can recommend you?

You can easily apply online for your loan. This will surely save a lot of time and endeavor. Concretely, this will help you to navigate through many varieties without leaving your home. In this context, it is recommended to compare a plenty of finance choices and choose the best solution for the small business system you have. Doing this, you will minimize the risk to waste your money. To get the best of a financial deal, you will need to put in some time in research. This will help you find out the right financial option for you. In this article, the message was to list different small business finance options and the best choice is your decision.

Small Business Financing Isn’t Just About Asking Your Local Bank, You Know

To hundreds of thousands of people in this country in search of their own piece of the American dream, finding a spot for themselves as owners of a small business often seems the most promising way forward. The notion of making it big as an online business is increasingly popular today. But the traditional business way of establishing oneself in a small business – starting a retail shop, a franchise or becoming a service provider of some kind – are alive and well too. Small businesses present entrepreneurs with an easy point of entry into the business world, with only a modest level of risk. Startup businesses like this need less capital, less strategic planning and are much more manageable. As modest as small business financing needs are, for people of modest means, they can still be somewhat challenging.

Your first stop looking for small business financing should be either your local branch of the Small Business Administration or its website. The SBA is a government organization that helps millions of businesses around the country find business financing or find a way to locate the kind of resources they need. At the very least, anyone seriously considering starting a business should check out the SBA website for the wealth of information they have on how small business financing works. You’ll find information on special-purpose loans, grants, SBA loans, 7(a) loan programs and all kinds of other resources. Organizations such as the Business Development Center in your area and the SCORE office can help you by being great source of information too. They can also help you locate investors and venture capitalists.

Businessmen starting small ventures who try to find financing with venture capitalists and other independent investors usually have a great start. They avoid the high interest loans that traditional means of finding small business financing usually involve. Finding venture capitalists and inspiring their interest in your venture is no small matter. You’ll usually need to create a business plan that is convincing enough, and you will need to find mentors and other kinds to helpers who will assist you in finding the right kinds of resources.

Where does one find Angel investors though? Most of these investors operate in networks; and you can tap into those networks on websites like vCapital and Garage. But there are more traditional ways that you could pick, too. A loan you obtain through a local financial institution, guaranteed by the SBA government organization usually comes with a longer loan period than a regular business loan. You would even have to contribute a smaller down payment. You’ll find SBA 7(a) loans at most banks when you go through their small business resource centers. You could also take advantage of the term loans that banks have too – these help you with your needs for working capital or for funding for machinery or other business establishments needs.

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The New Normal For Small Business Financing and Working Capital Management

With business financing options changing significantly during the past two years, it is appropriate to review what the “new normal” looks like so that small business owners will be prepared to cope with the challenges they now face with commercial lenders. Business borrowers are more likely to find commercial financing success by quickly accepting the fact that a “new normal” way of doing things has emerged.

The dramatic reduction in the number of commercial lenders that are actively making small business loans is one of the most significant changes in the business finance lending environment. Banks continuing to insist that they are still providing small business financing when in reality they have reduced or eliminated their commercial lending programs is an equally important part of the “new normal”.

A recent report showed that commercial lending activity fell by the biggest amount since records have been kept. This trend seems likely to get worse before it gets better because based on Federal Deposit Insurance Corporation accounting, almost one out of every ten banks is close to failing. The shaky current financial condition of many banks is further documented by reports from the Federal Reserve and United States Treasury Department that over 50 banks did not have sufficient cash flow to make their November 2009 payments for loans made by the Troubled Asset Relief Program (TARP). The payments in question are due quarterly, and over ten banks have missed three consecutive installments. Unlike banks which have tripled and quadrupled interest rates for individual consumers missing a credit card payment, presumably the government regulators are simply hoping to get their money back from the delinquent banks.

Banks have far too often conducted business as if they have a monopoly on their small business financing services. The “new normal” for small business owners should increasingly reflect the growing realization that banks can be replaced when they stop providing an adequate level of service to their business customers.

As a direct result of the continuing shortcomings of banks in providing an adequate amount of small business financing help as noted above, for most business borrowers the “new normal” will involve a new bank or at least a new commercial lender (which might not be a bank at all). Even though banks would like their small business owner customers to keep believing that only a bank like them can help business borrowers, this is truly a myth created by the bankers themselves.

For many essential commercial finance services such as commercial mortgage loans, numerous banks have indicated that they will no longer provide such financing anymore. For specialized business finance services such as working capital management, business consulting and business cash advances, banks only rarely provide a cost-effective and realistic option for commercial borrowers. For business owners which have commercial loans or working capital financing due to be refinanced within the next three years, planning ahead will be increasingly important to the success of their small business financing. With the “new normal”, if commercial borrowers wait until their bank decides to pull the plug on future small business finance programs, the timing is not likely to be as conducive to business refinancing.

The Small Business Financing Crisis

The current small business credit crunch is getting much attention and rightly so. We know very little about the overall small business universe because it is so huge and diverse. Most discussions about this topic focus on credit and lending, but the issue is much more complex than that. A more broad-based discussion is necessary to understand the full extent of the current crisis. The crisis encompasses both types of financing, debt and equity.

Personal Wealth

In good times or bad the top source of small business capital is the personal wealth of the owner. Even beyond startup, owners often tap into their personal wealth like a line of credit, on an ongoing basis. If available, personal wealth is easier to access than other forms of financing and may be the only source available. The primary sources of personal wealth are typically real estate and retirement accounts. Since 2008 both of these sources have taken a huge hit, so the amount of personal wealth available has plummeted. Most owners are experiencing the worst economic times in their lifetime. So even if they have personal wealth available, they are less likely to invest it in their businesses. Instead, they are cutting back or forgoing expansion.

Friends & Family

Another common source of capital has essentially dried up – friends and family. For the reasons discussed above, friends and family have less wealth available and are less willing to invest.

Creditworthiness

The ability of a private company to borrow funds depends on the cash flow of the company, the available collateral, and the credit of the owners. Most small business revenue, profits and cash flows are down substantially. The value of available collateral, often including the personal residence of the owners, has also dropped significantly. The compensation of the owners is often based on profits, so it is down, too. With both personal income and wealth declining, the credit score of the owners has likely declined as well. All of these factors, in combination, result in less creditworthy private companies.

Credit Cards

Another common source of capital is using credit cards typically based on the personal credit of the owner. Credit card companies have tightened credit standards for getting new or increasing existing credit lines. In many cases they have actually reduced existing credit limits. As discussed above, the creditworthiness of both the owners and the company has declined. The result is that credit card financing is less available and tougher to get.

Bank Financing

Many banks have funds available and seem willing to increase small business lending, but have other issues preventing them from doing so. The demand for business loans has decreased because many companies are cutting back or forgoing expansion. As discussed above, there are fewer creditworthy companies. Many banks are facing increased pressure from regulators to reduce risk while experiencing difficulties with some of their commercial real estate loans. Although small business loans can be very profitable, they are very risky. Many small banks are more familiar with other types of loans and may have little experience dealing with Small Business Administration (SBA) loan programs. Continuing issues with the funding of SBA programs has created some doubt about the availability of loan guarantees. Again, the result is bank financing is less available and tougher to get.

Conclusion

All of these issues create a complex small business financing crisis that requires broad-based solutions. A vigorous and sustained economic recovery would alleviate many of the issues, but many expect small business to lead us out of the recession. How is that supposed to work? We need better ways to finance small businesses. Ones that will enable institutional and individual investors to invest in small, private companies like they currently do in large, public companies. The expansion and increased visibility of the secondary market for SBA guaranteed loans is a small step in the right direction that will hopefully lead to a more comprehensive solution.

Is it Worth Spending on a Small Business Finance Software?

When is it important to buy small business finance software packages?

Indeed, many of small business owners feel besieged when they think of handling their company’s finances. One of the first thoughts that cross their mind at the first moment is to sign up a book keeping facility to maintain the overall finance properly.

Practically, this strategy may not prove to be a cost effect choice in case that your business is not into profits. An alternate solution would be to opt out for small business finance software. Obviously it would not work as an accountant, but it can be a bit cheaper.

What is the cost of small business finance software?

First, you should know that you can buy the software from the office supply shops. There are indeed a large number of sites on the World Wide Web that provide business management software for personal or small business use. They sell a business accounting software from about $40 for simple versions and around $10,000 for complex ones.

In this context, going with the cheaper version of this software is more apt for smaller businesses. This is especially true since their basic aim is to fulfill their utility needed to perform simple office tasks like payroll and book keeping for the company. Later on, in case you are satisfied, then you can opt out for professional versions.

How to choose the right software?

Indeed, deciding what kind of small business accounting software to buy can be a bit complicated task and time consuming as well.

To save the stress, it is wise to consult a well-known accountant for taking some recommendations of buying the easy to use business financial software that fits your business needs the optimal way.

What is the mistake that you should avoid doing here?

After purchasing the product, one should get ready to use the software in intervals. Once your business finance software is selected, it is wise to learn how to use it in a step-by-step fashion.

Trying to know all the software modules at one shot can be really confusing to one who is not aware with working with numbers.

How can you customize your software?

The main purpose behind any business software is to make proper financial assessments along with processing and recording your accounting transactions.

They even permit small businesses to keep going more effectively. As a matter of fact, there are a lot of companies that are willing to offer training on the usage of this software.

Here, it is worthwhile to know that there is user friendly finance software available in the market. In case your business has special requirements, which are not available, you can ask for a customized version.

What is the benefit of having this tool by your side?

This tool can also get you a complete picture of your business regarding the performance of all departments. In addition, it can provide details on the deficiencies and excesses of your business.

Adding to this, a proper control of funds owed in and out is yet extremely complex without the knowledge to know how important such figures are.

And finally, here are my parting words for you!

Small business finance software can help you to reduce your extra burden of finance transactions by getting more accurate results.

So, reduce your stress and carry out your finance transactions with the help of the best available small business finance software. This is a sure shot way to save your time, energy, and cost as well.

Small Business Financing Options – The Major Types Of Funding For Your Young Business

It is hard being a young company in today’s corporate world. There are so many aspects to business that could make or break your chances at success. However, there is only one thing that is placed at the top of the list for a definite crash of your business.

The thing I am talking about is the LACK OF MONEY. Small business financing options are the only way you can assure you have enough capital for your young business.

Some of the most popular small business financing options include:

1. Venture Capitalists – Even though venture capitalists usually do not take a ‘risk’ with young companies, it is still a small business financing option. It does not mean that you will not find any companies that are willing to take a chance with your company.

Some venture capitalists seek out business types they believe will be ‘booming’ within the next few years, and they look for owners interested in establishing a business of that type. It does not cost you or them anything for you to simply inquire about funding.

2. Business Loans – This is probably the most popular option. There are loans specifically for the type of nice your business is in, small amount loans, large amount loans, unsecured, secured loans, and many others. You have plenty of small business financing options here; you are the only one that can pick the right type for your situation.

3. Lease For Equipment - So, this is not necessarily one of the small business financing options, but you do need equipment to successfully run your business. Most of the time, you need the equipment before you even start your business. The joy of leasing your equipment is you do not need a lot (or any, really) of money to get the equipment. Plus, you are basically renting to own.

After the assigned time of the lease, you are given the option to purchase the equipment. If you like it, you have already paid half the payment to own it. If you do not like it, you can simply sign another lease for a different type of equipment. I am placing this under small business financing options.

As you have read, you can receive funding from any of these small business financing options. The important thing to remember is without building positive credit for your business, you will not be accepted for any of these small business financing types. You most certainly will want to establish the best reputation you can with vendors and lenders.