by: Jo Ann LeQuang
One of the main reasons that viable and otherwise sound businesses fail is that owners lack financial resources to weather the first difficult months and even years. Starting a freelance or other home-based enterprise can be a lucrative venture, but it is highly unlikely the rewards will roll in early in the game.
Most business advisors recommend that a new business owner sock away enough money to support himself for a year or more before embarking on a business.
This does not mean that the business will not take in money, even early on. The usual course of small business is that business starts slowly at first and builds, often in fits and spurts. However, small businesses will have a disproportionate amount of expenses in these first months and years.
You'll be surprised by the expenditures you'll have in the first year; you have to buy all of your equipment, supplies, permits, software, and so on. These seemingly minor items can end up costing you thousands of dollars. Covering those expenses can be tough. Even when a new business starts to earn money, it is not unusual for it to post losses in the early months because necessary expenditures simply outpace earnings.
Besides saving money for the day you start your business, you should also work very hard to reduce your personal expenditures. Anything that can be paid off before you start your business should be paid off. Besides, it will be good practice for the new business owner to practice living more frugally! Most new businesses will take a lot of financial flexibility and learning how to live on less is a great skill that just about every business owner will tell you is important.
If you have debt (and who doesn't?) you may want to consider something known as debt consolidation. Before you get riled up, debt consolidation is not bankruptcy or debt settlement. It's a perfectly legal, ethical way to roll your many small debts together in one package and then negotiate a better loan on the large amount. The idea behind debt consolidation is that you may be able to restructure (consolidate) your debt in such a way that you will have to pay less interest to pay it off.
Debt consolidation won't hurt your credit report. In fact, it could actually improve it! That's because debt consolidation means you get a big loan to pay off your smaller debts. Paying off a debt usually improves your credit. And if you manage the larger debt consolidation loan well, that will help your credit, too.
By the way, a good credit score is essential for a new business owner!
But how does it work? In theory, you gather your debts. Let's say you owe $5,000 on a department store credit card that charges 22% a year interest. That may sound exorbitant, but it is not all that unusual. The interest on a loan like that is $1,100 a year!
Let's say you have some other loans. For the purpose of illustration, let's say you have one credit card maxed out to $10,000 at 16% ($1,600 interest a year) and another credit card that charges 14% where you've charged $3,200 ($448 a year in interest).
Put these three amounts together and add them up. You'll end up with $18,200 in debt. Now let's just say for theory's sake that you can find a new loan for $18,200 that charges just 12% interest. You get that new loan, use it to promptly pay off your three charge cards, and now you pay off the one new loan. By the way, 12% of $18,200 is $2,184 in interest a year.
Consolidating that debt saves you $964 a year in interest. You have to pay $80 a month less. If you are really savvy, you'll take that $80 and apply it toward the principal. You spend the same exact amount of money, but you will get out of debt significantly faster.
That's a small picture of debt consolidation. You can also roll in car notes, student loans, medical bills, and other debts.
Of course, debt consolidation can be tricky. First, it may not work for you-you may owe money but at rates that are already as low as you can get. Second, you might want to get a lower-interest-rate loan but cannot qualify. It helps if you own your own home, but even if you do not, there are other ways to consolidate your debt.
If you can consolidate and pay off your debt, you'll have a tremendous business edge, one that is hard to appreciate until you've been in business for a while. The lower you can reduce your expenses and the more adjustable you are to living modestly during the early years of your business, the more freedom you'll have and the more time you'll have to give your business the start it deserves!
About The Author
Jo Ann LeQuang has owned and operated her own business for five years in Texas. Find out what she does at http://www.LeQMedical.com and, if you're a writer interested in a home-based business, check out http://www.WorkingTexasWriter.com .
Monday, July 23, 2007
Loan Insurance Can Be A Valuable Safety Net
by: Simon Burgess
Loan insurance can be a valuable lifeline if the worst thing should
happen and you are unable to work due to involuntary unemployment, an
accident or prolonged sickness. A policy will cover you for a specific
amount of money and for a period of time, usually around 12 months,
sometimes up to 24 months, which means that you would be able to
continue to met the monthly repayments on a loan, credit card or other
borrowing. However it can only be a valuable lifeline if you have
purchased the policy correctly.
Policies have exclusions within them and these are usually hidden in
the small print, so unless you specifically read the small print, they
can go unnoticed. This could mean that if you try to claim for
something that is excluded, then you simply won’t get paid and will
have wasted the premiums as well as have the financial worry of how to
cope. Unfortunately the majority of people buy a policy alongside their
loan or credit card from their and do not bother to read the small
print, believing that they have bought a policy they are eligible to
claim on.
In order to get the right policy for you, then it is essential that you
shop around go with an independent specialist provider who knows the
ins and outs of the sector and so can give you the benefit of their
knowledge. Along with this, the standalone provider is able to offer
you the cheapest premiums on a policy and this usually can make a huge
difference compared to the price quoted by the high street lender.
With finances often being stretched to the limit – after all, this is
why you take on a loan in the first place - then it is of course wise
to get the essential cover for the cheapest premium possible. The high
street banks have been well known for charging premiums that are way
above the odds in favour of making huge profits, even if this means
giving the consumer poor advice when it comes to their policy. So loan
insurance can be a valuable lifeline, but only when taken out
correctly, so do thoroughly research the marketplace before you buy.
About The Author
Simon Burgess is Managing Director of the award-winning British
Insurance (http://www.britishinsurance.com), a specialist provider of
low cost income payment protection insurance (PPI), mortgage payment
protection insurance (MPPI) and loan payment protection insurance.
Loan insurance can be a valuable lifeline if the worst thing should
happen and you are unable to work due to involuntary unemployment, an
accident or prolonged sickness. A policy will cover you for a specific
amount of money and for a period of time, usually around 12 months,
sometimes up to 24 months, which means that you would be able to
continue to met the monthly repayments on a loan, credit card or other
borrowing. However it can only be a valuable lifeline if you have
purchased the policy correctly.
Policies have exclusions within them and these are usually hidden in
the small print, so unless you specifically read the small print, they
can go unnoticed. This could mean that if you try to claim for
something that is excluded, then you simply won’t get paid and will
have wasted the premiums as well as have the financial worry of how to
cope. Unfortunately the majority of people buy a policy alongside their
loan or credit card from their and do not bother to read the small
print, believing that they have bought a policy they are eligible to
claim on.
In order to get the right policy for you, then it is essential that you
shop around go with an independent specialist provider who knows the
ins and outs of the sector and so can give you the benefit of their
knowledge. Along with this, the standalone provider is able to offer
you the cheapest premiums on a policy and this usually can make a huge
difference compared to the price quoted by the high street lender.
With finances often being stretched to the limit – after all, this is
why you take on a loan in the first place - then it is of course wise
to get the essential cover for the cheapest premium possible. The high
street banks have been well known for charging premiums that are way
above the odds in favour of making huge profits, even if this means
giving the consumer poor advice when it comes to their policy. So loan
insurance can be a valuable lifeline, but only when taken out
correctly, so do thoroughly research the marketplace before you buy.
About The Author
Simon Burgess is Managing Director of the award-winning British
Insurance (http://www.britishinsurance.com), a specialist provider of
low cost income payment protection insurance (PPI), mortgage payment
protection insurance (MPPI) and loan payment protection insurance.
Boost Your Business With Effective Financial Management
by: Suzanne Macguire
Working Capital, to put it briefly, refers to a business organization's
total current assets (short-term ones), marketable securities, accounts
receivables, inventory, and cash. Management of the financial segment
is a great responsibility that demands equal attention on investments
as well as sources of income (both long term and short term). In fact,
a business firm can never enhance its value if it fails to survive
initial hiccups in the short run. Hence, efficient management of
finances is essential for any business to survive.
Strategies to finance short-term working capital needs much greater
attention than are usually practiced. Precisely speaking, there are two
short-term working capital financing options; business cash advance
programs and short-term commercial mortgage loan programs that have
been often overlooked. But these two working capital funding options
are excellent for small and new business ventures to ward initial
financial obstructions off their way. Business cash advance is one of
the best financing options for businesses accepting credit cards as
mode of payment. Speaking of benefits, business cash advance offers
great help even to prospering businesses. For instance, even thriving
businesses need working capital that might not be borrowed from a bank.
Under these circumstances, business cash advance or merchant cash
advance programs come to the rescue. Retail chains, bars, and
restaurants, service businesses are highly benefited from these finance
programs.
Receivable factoring or "credit card factoring" is another unique
working capital management strategy, whereby the businesses sell their
future receivables at a discount. However, it is not possible for all
small businesses to document their receivables in order to qualify for
this financing option. The documented sales volume and credit card
sales activity of these small businesses serve as financial asset to
attain a business cash advance or a merchant cash advance.
Not negating the importance of short-term working capital loans, it is
also necessary to understand the importance of long-term working
capital management. While planning to finance your business long-term,
make sure to get hold of a long-term commercial mortgage for at least
15-20 years. In a few cases though it becomes essential to avoid
long-term commercial mortgage loans and opt for its short-term
counterpart. This would especially be applicable for those who intend
to sell or refinance their business within one to five years. In fact,
availing short-term commercial mortgage loans comes with the added
advantage of negating prepayment penalties and "lockout" fees, normally
associated with long-term loans.
There are few lenders providing effective services for both these
financial strategies. Hence, working capital loan in the form of
business cash advance programs or commercial mortgage loans should be
chosen with great care.
About The Author
Suzanne Macguire is an Internet marketing professional with expertise
in content development and technical writing in a variety of
industries.
http://www.cashdirectone.com
Working Capital, to put it briefly, refers to a business organization's
total current assets (short-term ones), marketable securities, accounts
receivables, inventory, and cash. Management of the financial segment
is a great responsibility that demands equal attention on investments
as well as sources of income (both long term and short term). In fact,
a business firm can never enhance its value if it fails to survive
initial hiccups in the short run. Hence, efficient management of
finances is essential for any business to survive.
Strategies to finance short-term working capital needs much greater
attention than are usually practiced. Precisely speaking, there are two
short-term working capital financing options; business cash advance
programs and short-term commercial mortgage loan programs that have
been often overlooked. But these two working capital funding options
are excellent for small and new business ventures to ward initial
financial obstructions off their way. Business cash advance is one of
the best financing options for businesses accepting credit cards as
mode of payment. Speaking of benefits, business cash advance offers
great help even to prospering businesses. For instance, even thriving
businesses need working capital that might not be borrowed from a bank.
Under these circumstances, business cash advance or merchant cash
advance programs come to the rescue. Retail chains, bars, and
restaurants, service businesses are highly benefited from these finance
programs.
Receivable factoring or "credit card factoring" is another unique
working capital management strategy, whereby the businesses sell their
future receivables at a discount. However, it is not possible for all
small businesses to document their receivables in order to qualify for
this financing option. The documented sales volume and credit card
sales activity of these small businesses serve as financial asset to
attain a business cash advance or a merchant cash advance.
Not negating the importance of short-term working capital loans, it is
also necessary to understand the importance of long-term working
capital management. While planning to finance your business long-term,
make sure to get hold of a long-term commercial mortgage for at least
15-20 years. In a few cases though it becomes essential to avoid
long-term commercial mortgage loans and opt for its short-term
counterpart. This would especially be applicable for those who intend
to sell or refinance their business within one to five years. In fact,
availing short-term commercial mortgage loans comes with the added
advantage of negating prepayment penalties and "lockout" fees, normally
associated with long-term loans.
There are few lenders providing effective services for both these
financial strategies. Hence, working capital loan in the form of
business cash advance programs or commercial mortgage loans should be
chosen with great care.
About The Author
Suzanne Macguire is an Internet marketing professional with expertise
in content development and technical writing in a variety of
industries.
http://www.cashdirectone.com
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