FINANCING FROM THE BALANCE SHEET
Sometimes you can get financing based on the value of assets in your business or the value of items you are using the loan to buy. These include:
1. Accounts receivable financing:
Also called factoring, this is a means of obtaining financing based on the value of your accounts receivable.
2. Bank line of credit:
This is a pre-established amount of credit that you can use as needed. A line of credit can offer more flexibility than a loan and is simpler to obtain. It is typically based on 75 percent of your current accounts receivable or 50 percent of the value of your inventory.
3. Equipment leasing:
Instead of buying business equipment, consider leasing to conserve cash. Many leasing companies offer financing.
4. Chattel mortgages:
In a chattel mortgage, you obtain a loan to buy an item and use the item itself as collateral for the loan.
5. Plant improvement loans:
You may get a loan to improve your building or facility by putting up the property itself as collateral. The loan will typically be limited to 75 to 80 percent of the property’s market value.
6. Conditional sales contract:
This allows you to finance the purchase of an item; the vendor still owns the item until you have paid the full amount.
TIP: No matter how impressive your business looks on paper, your face-to-face meeting with a lender or investor can make or break the deal. Be prepared to impress! Know your financial SWOT (Strengths, Weaknesses, Opportunities and Threats). Focus on your strengths in your “elevator pitch” and your presentation.
This series ongoing series handbook prepared by Marjorie Weber was prepared will also be part of the Miami Bayside Foundation to qualify small business owners for the Miami Bayside Foundation loan program.
Handbook series Small Business Start Up
Part 1: Small Business Start Ups Making It Legal; Part 2: Small Business Start Up Capital Access Primer and Key Steps ; Part 3: Definitive Steps to Create the Optimal Small Business Growth Team Part 4: Once You Have the Dream Team, It’s About Employee Retention, Part 5: Delegating Responsibilities Policies and Procedures – Letting Go Part 6: Breaking Down the Set Up of Small Business Financial Records Part 7: Three Best Bet Picks for Small Business Accounting Software Part 8: To Lease or To Buy? Issues Relating To Both In Today’s Market part 1 Part 9 Decided on a Business Lease? 20 Lease Provisions Part 10 What Small Business Contracts Are Required and Who Reviews? Part 11 What are the most serious small business risk and coverage issues? Part 12: Keeping Sightlines on Specific Small Business Target Markets Part 13: Small Business Targeting and Related Branding Components Part 14: Keys to Developing an Essential Small Business Marketing Plan Part 15: Small Business Social Media Blocking and Tackling 101 Part 16: Small Business Owner’s Primer- Understanding the Balance Sheet Part 17: 5 Considerations to Properly Price Products and Services Part 18: How to Handle Inventory in Cash Flow Projections Part 19: Primary Components for a Comprehensive Business Plan
Related articles:
Investment Diversification Should Include Diversity in Investments
Eli Mendoza on Equity and Financing