Business Finance Solutions: Business finance solutions are the various methods in which money for starting or running a business can be obtained. One of the most important things that one cannot avoid putting under consideration when starting a business is the capital. Capital is the money that the business will use for various activities. Some of these activities include building premises that will act as the offices or headquarters of the business.
Business Finance Solutions: Facts to consider!
If the owner of the firm does not wish to build offices for the establishment, he or she might consider renting the offices and as such, money shall be needed to pay the rent; the money will also be needed to buy and sell inventory (i. E., the goods that shall be the main aim of the firm; money is also needed for communication costs, electricity bill and also to pay the members of staff their salaries and wages among numerous other needs that the company or business organization shall have.
Whenever one starts a firm, one of the first thing that he or she needs to ask himself or herself is whether he has enough money tied up in his or her own personal savings. The assumption here is that the entrepreneur has been working for some time either in another firm of his own or was an employee of another organization. If this is the case, he or she should put this as the first source of finance for the firm about to be started.
- This is an interest free source of funds but it also has its own catch.
One needs to ask himself or herself whether the money will best serve him or her when it is put into the firm or it can give him or her better financial returns when it is put to other uses such as investing it in risk free ventures such as bonds. When the money can yield more returns elsewhere, then it should not be put into the company and you should know this when it comes to business finance solutions.
In many situations, ones personal savings are not enough to start up a company. The money is only to be used as part of a mix of many other different solutions. Whenever one finds that the money raised through ones own personal savings, then he or she should consider obtaining a loan.
These loans can be obtained from a wide variety of sources but the most popular of these sources is the banks. Whenever one goes to apply for loans in banks, he or she will be required to fill in a form to explain certain details. These details include such things as ones own personal details (name, residence, contact address, etc.).
Business Finance Solutions: Attention!
The reason why that person needs the money and how much money he or she needs among many other details that the bank deems important in the loan application will also be required. Also, one will be required to pledge collateral against the loan. This is property, such as a piece of land, which the bank will auction in a situation where the borrower has failed to repay the loan.
Once a business organization has already put up shop and is up and running, there are several other options that it can use to obtain finance. This includes floating of its shares to the public. This is done through an I. P. O. (initial public offer).
This is where the company issues pieces of paper to the public after people have paid a sum of money to the organization. The more money one has paid up, the more shares he or she has towards the organization. Any adult member of the public can buy shares in the company.
It is important to state that floating of shares means giving up some control in the decision making of the organization. The more shares that one has, the larger a say he or she has towards how the organization should be run. With these shares also, one shall be expected to pay dividends after a pre determined financial period and you should know this when it comes to business finance solutions.
A dividend is the amount of money that a firm organization (in this case a company) is required to pay its shareholders that is proportionate to the amount of shares that the people have. This means that the more shares a person has, the more money he or she gets in terms of dividends.
- Another way in which a business can get finance is through retained profits.
This means that after a company has gone through an entire financial year and it has made a profit, it should not look at using up all the profits. What it should do is that it should keep some of this profit for the sake of expansion of the business, meeting its financial obligations or repaying some debts it may have incurred a while back. When this is the case, the company should look at whether the organization is financed by equity (shareholders) or not.
Business Finance Solutions: Closing Tips!
If the company is not financed by any shareholders, then the decision as to how much money should be retained in terms of profits can be made exclusively by the directors of the organization. However, if the company is financed by shareholders, then it is absolutely necessary to involve them in the decision making.
It is also important to tell them how much money the company intends to keep at the end of every financial period as part of retained profits. This amount is usually determined as a percentage of the profits as it is not easy to determine how much profits the company anticipates to make in a future financial period.
There are numerous other business finance solutions but the above mentioned are the ones that are most commonly used. A business needs to first know how much money it is going to need in order to meet its financial obligations.
After this is done, one should then go ahead and see how well he or she can distribute the requirement over all the various types of financing available. This is a wise decision to make, even if the money that one has in his or her own personal savings is enough to meet all the needs of the new company that is going to be started and this is what you should know about business finance solutions.