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Small businesses these days have issues getting off the ground, due to the fact that only five percent of start-up business are able to raise sufficient capital.  Of the five percent of ideas that are stellar enough to be take off, the capitol is usually raised on investors’ terms, so as you may see, raising capital to fund your business is not an easy proposition.

Entrepreneurs

Entrepreneurs are often naïve in creating a business, and instead of convincing the bank of why they should invest; they show them how great they personally think their product or idea is. Inventors and new business owners don’t know how to go about the process, because of their lack of experience.  New business owners are often misled or misinformed because of this inexperience, and not knowing the process can cause hours of time to be wasted on a lost cause.  Being mis-informed often causes entrepreneurs to present the wrong information, and cause them to not be correctly prepared.  Movies make it look so easy, but in real life, it’s an endless and complicated process that most people aren’t able to take on, so why go down that road? Seeing as there are so many ‘tricks of the trade’ to getting a bank to believe in your ideas, why not raise capital in a way that is much easier?

Small Business Loans

For new business owners, the hardest thing to do is to find money to fund their ideas. The process of obtaining working capital, however, is necessary.  Taking out a small business loan can be an easy way to get your business up and running, and has a simple process.  A good business pitch and credit history can be all you need to get a loan to start your business. In this process, you will pay back the money you borrowed with a small cash increase (interest), in small customizable intervals, such as once a month.  So if you don’t want to have to deal with banks anymore, look into getting a business cash advance.

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If you are a small business owner facing a declining business,  there are many ways to turn it around and change the circumstances so they are in favor of your business.  The book “Corporate Recovery: Managing Companies in Distress”, but authors Slatter & Lovett, gives valuable advice on turning companies around.  Some of the steps they recommend for your small business are as follows:

1.  Get control of cash flow and short term financing with a plan for Crisis Stabilization.  Understand all of the resources you have at hand, including your small business loan and funding resources.

2.  Perform a thorough assessment and make sure your leadership team is the one that is going to get the job done for your small business.

3.  Keep the lines of communication open with stakeholders, and make sure you have their support.

4.  Focus existing resources – be willing to sell peripheral assets to generate cash.

5.  Make any structural changes needed, including laying off unneeded employees.

6.  Understand the reasons your small business got into trouble in the first place, and focus on changing those processes.  Figure out how to be efficient and lean.

7.  Restructure the business financially, if needed.  Only make commitments that you can meet.  Raise working capital, or find other sources of funding.

Cash management is also critical to turning around a failing business.  Don’t spend cash unless it leads to generating revenue directly.  Prioritize payments.  Develop plans so that suppliers who aren’t getting paid understand when they will receive payment.  Communicate constantly with your creditors.  Implement a cash-only basis with your customers.  Provide status and updates for everyone involved in your business process.

The stress on communication is critical; creditors know that if your small business ends up in bankruptcy, they will likely receive very little return on their invoice, so many will be willing to work with you AS LONG AS you keep the lines of communication open.

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Customers, of course, are the vital key to a successful business.  Without sufficient revenue coming in from existing and new customers, business debt will quickly consume the entire business and the business will inevitably fail.  However, just having customers isn’t sufficient; customers must pay their outstanding invoices or your small business will quickly fail.

As most small business owners know, it can be both extremely frustrating and time-consuming  to chase down your clients and get them to pay their outstanding invoices.  If even a small number of your customers are late in paying their accounts, then as a small business owner, you will soon find yourself in the position of not being able to pay your own creditors, payroll, and accounts.

Often, when finding themselves in this position, a small business owner will consider taking out small business loans – which is a sound strategy.  However, business finance offers another method for small business owners to seize the value of outstanding invoices – Invoice Funding.  Invoice funding is both efficient and easy to accomplish, as alternative method of business finance.

Invoice funding works as follows:  a business submits outstanding invoices to an outside agency, commonly known as a ‘factoring agency’, who then assumes responsibility for collecting the debt.  The factoring agency is responsible for following up with the client, and is also responsible for starting legal proceedings to recover the debt if the client refuses to pay.  The factoring agency will give the business upfront capital for the invoices, often as quickly as in one business day, and often at a value of up to 90%.  When the agency receives payment on the invoice, they deduct a commission and give the rest to the small business.

Of course, a small business that chooses to hire an outside agency to administer invoice funding will have to pay a commission to the agency, but in the event that your small business finds itself in need of immediate capital and thousands and thousands of dollars in outstanding invoices, a 10% commission is a smart investment to save your business.  Being in a strong financial position, without an overwhelming balance in outstanding invoices, will allow the small business owner to be able to face sudden or unexpected expenses with relative ease.

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