The Perfect Guide to Small Business Financing

Why businesses need money.With the outbreak of Covid-19, a lot of companies need to look for various types of business funding so as to keep operating their business. 

Guide to Small Business Financing

According to a Business Bank Survey published in Britain, external funding was sought by around 58% of the SME companies during the last few years. Even though finance is required by businesses for lots of different reasons, you will come across some specific reasons out there. 

This consists of loans to purchase equipment, for the working capital, for employing more staff, and so on.

reasons why finance is applied by most of companies at present.

1. Working capital

The primary aspect of the economic health of any company is going to be adequate working capital, and the lack of sufficient working capital can impact your company’s future to a great extent. A lot of companies went for external funding for creating sufficient working capital which will help them to satisfy their ambitions of development. 

It is possible for a loan to cover the short-term financing specifications while providing the cash to the company or it will help in narrowing the gap between supplier payments and customer orders for aiding the business to fulfill the financing responsibilities. It has been shown by a recent report that the most typical reason for small companies to look for financing happens to be working capital.   

Your business can use this type of funding to make the best use of new opportunities. A helpful “cushion” will be provided by working capital loans for your business in case you are in need of some additional money. You will be aware of the fact that a loan is actually covering your daily running expenses, and therefore, the funds will be available to you for meeting any unforeseen expenses.

It will be possible for the seasonal companies to take advantage of working capital financing for covering the fundamental expenses during the quieter times.

2. Asset purchase

You often need to buy assets like new vehicles or equipment for prospering your business and enhancing sales. While adequate cash might be available to you for covering working capital costs, you might go for a loan for covering the buying of new assets. A fantastic way to spread the expenses of purchasing a costly asset is going to be an asset funding loan. You will be able to plan the cash flow beforehand with the aid of loan terms and fixed monthly repayments up to 5 years.

You can use an asset purchase for purchasing various items for your company. You can use funds for buying business vehicles irrespective of whether it is your first vehicle or you want to buy another one to reinforce your present fleet. A loan can also be used by you for purchasing IT and office equipment for your business.

You can likewise purchase new machinery for making fresh products or expanding production while spreading the expenses rather than paying a huge amount directly.

3. Commence a business

Funding will be needed by the new companies that are in the startup phase to prosper. Very few directors will be able to provide funds for their companies on their own, and therefore, will depend on external financing. Several options for external funding are available at present such as borrowing from known persons, loans from financial institutions, crowdfunding, equity investment from the business angels, as well as funding grants. 

One can use a loan for commencing a company for virtually everything including the hiring of employees and purchasing stock to marketing.

However, it can be somewhat tough to secure startup financing and a lot of information will be needed for lots of conventional finance providers like a comprehensive business plan. 

4. Growth funding

You will need financing which will allow you to execute the business plans in case you want to take your company to new heights. A loan for growth funding will help irrespective of whether you like to expand the range of services or products, enhance sales, employ more staff, shift to new premises, and so forth.

In fact, growth funding will allow you to make your dreams come true by helping you to use new opportunities to your advantage. 

External financing might be your solution for growth in case the day-to-day running costs are covered by your business. Most of these loans are going to have fixed monthly repayments over the loan term, thus allowing you to schedule the business plans more easily while you grow. 

5.Debt restructuring

In case you are in the need of restructuring the debt of your business, a loan which minimizes expenses and also consolidates the borrowings will be able to make your funding more adaptable. A loan for restructuring your current debt will lessen the monthly payment numbers to monitor and thus will make financial planning much easier and also minimize the total monthly repayments.

It will be possible for your business to grow by refunding your company by means of freeing up money for working capital as well as expansion in your company. 

Places to get money for your small business

As per a recent analysis, during the initial operation year, in excess of 95% of the fresh companies don’t succeed. One of the most typical reasons happens to be an absence of funding. Cash happens to be the lifeline of any company out there. Capital will be required for undertaking a long and fascinating journey. For this reason, business people ask the question of how to finance their startup in every phase of the business. 

When financing will be needed by you will depend on the type and nature of the company.

We have mentioned various sources of funding available at present for the businesses out there. 

1. Bootstrapping

Bootstrapping, also referred to as self-funding, happens to be an effectual way of financing particularly for startups. Often first-time businessmen experience problems receiving financing without depicting some sort of traction. It will be possible to invest from your personal savings or you can likewise ask your known people to contribute. This kind of funding needs less compliances or formalities. On most occasions, the interest rates are flexible as well.

One should consider bootstrapping as the primary funding options due to its benefits. You’re tied to your company once you have your personal cash. This is considered to be a good point by the investors in the long run.

However, this is appropriate only if there is not much initial requirement. Bootstrapping might not be a sensible option for some businesses which are in need of cash from the first day only. 

2. Crowdfunding

In recent times, crowdfunding is becoming quite popular as one of the new ways to finance a startup. It is similar to taking a loan, investment or contribution at any given time for multiple individuals. 

Crowdfunding works in this manner – A comprehensive description of the business is going to be put up by an entrepreneur on a crowdfunding podium. All the objectives of the business will be mentioned by him. He will likewise mention the amount of funding required by him and why. It will be possible for the consumers to contribute money in case they like the concept after reading about the company.

All those providing cash are going to make online pledges while promising to give a donation or pre-purchase the item. It is feasible for any person to help a company by providing money in case they really believe in the business.

For what reason should Crowdfunding be considered to be a financing option?

Crowdfunding is able to generate interest and thus help to market the item. It will also be useful in case you are uncertain regarding the fact that whether your product will have the necessary demand. In this way, professional brokers and investors can be cut out and financing can be done by common individuals.

Also, venture-capital investment might be attracted by it in case a business experiences a fruitful campaign. 

Moreover, crowdfunding happens to be a competitive area for receiving financing, and therefore, it might not be useful to you eventually unless your company is quite solid and can attract the consumers by some images and a description online. 

3. Angel investment

By the term “angel investors” we refer to folks having adequate money who are interested in investing for upcoming startups. Besides capital, they can likewise provide advice or mentoring. 

A lot of well-known companies such as Google and Yahoo have been helped by the angel investors for starting up. Usually, this alternative investing type happens in the early phases of the growth of the company. For higher returns, angel investors like to take more investment risks.

However, being a funding option, angel investment comes with its downsides as well. As compared to venture capitalists, lesser amounts are invested by angel investors. 

4. Venture capital

Venture capitals happen to be finances which are managed professionally. Venture capitalists will be investing against equity in a business on most occasions and they will exit once there is an acquisition or an IPO.

Venture capitalists will be offering mentorship and expertise and will likewise help to assess the company from the perspective of scalability and sustainability.

Small companies which are generating revenues already will find a venture capital investment to be ideal for them. Fast-development businesses such as Uber and Flipkart having an exit strategy will be able to gain a substantial amount of money which can be utilized for the quick development of their business. 

However, being a funding option, venture capitalists come with several downsides too. In terms of company loyalty, venture capitalists come with a short leash, and they try to get back their investment in most cases within 3 to 5 years. They might not feel interested in you in case you have got any product that requires more than 3 to 5 years to get to market. 

On most occasions, venture capitalists look for more stable and larger opportunities with businesses having solid traction and a strong team of employees. It will also be imperative for you to be flexible with the business and give up some control at times, and therefore this will not be the most effective option for you in case you are not much interested in a lot of mentorship.

5. Business incubators and accelerators

This can be considered to be a financing option for early-stage businesses. In fact, a lot of startup companies are assisted by these programs every year.

There is not much basic difference between these 2 terms and they are used interchangeably in most cases. Incubators are accountable for nurturing the business offering training and shelter tools to it. Almost the same thing is done by the accelerators; however, while accelerators aid in taking a big leap incubators help the business to walk. 

On most occasions, these programs operate for 4 to 8 months. Time commitment from the entrepreneurs is needed by them and this platform will likewise enable you to make effective connections with investors and mentors out there.    

6. Winning competitions

An increasing number of competitions has aided in maximizing the fundraising opportunities to a great extent. Entrepreneurs having business concepts are motivated by it to establish their own companies. It will be imperative for you to prepare a business strategy or make a product in these types of contests. 

You will be able to get media coverage as well by winning such contests. In these competitions, you have to make the product of yours stand out. Your idea can be presented either personally or by means of a business plan. It is essential for the idea to be able to convince everybody that it is worth investing in.

7. Bank loans

On most occasions, when businessmen think of financing, they think of banks. 2 types of financing are provided by the bank. While one happens to be funding, the other is the working capital loan.

The latter will be needed to operate one complete revenue-generating cycle, and it is the debtors and the hypothecating stock that will decide its limitations. Financing from the bank is going to involve the normal procedure of sharing the valuation details and the business plan together with the report of the project. 

8. NBFCs or microfinance providers

What will be your action when it is not possible for you to get entitled to a loan from the bank? There is no need to worry since one option will be available to you.

It happens to be microfinance which implies the availability of financial facilities for those that won’t be able to make use of bank loans. This option is ideal for all those who do not have good credit ratings and have limited requirements. 

9. Quick methods of raising money

Apart from the ones mentioned above, you will likewise find several more ways for raising funds. Although these might not be applicable to everybody, we will nevertheless check them out. 

Selling assetsThis option might fulfill your fund requirements for the short term in spite of appearing to be a somewhat difficult step to go for. The assets can be bought back once the crisis situation is over.

Product pre-saleA highly effective way to raise cash for your company will be to market your products prior to launching. It will enhance your cash flow significantly in the long run.

Credit cardsOne more effective way to obtain instant money is going to be business credit cards. In case you happen to be a fresh company without many expenses, a credit card can definitely be used by you. Nevertheless, bear in mind that it is possible for the interest rates to build up fairly quickly in such cases. 

External sources of capital will be needed in case you would like to grow quite quickly. It might not be feasible for you to use the market opportunities to your advantage in case you stay for a long time without external funding.

With so many lending options out there for getting started, it is imperative for the responsible entrepreneurs to question themselves regarding the amount of funding that will be required by them. 

Tips for saving money initially

Being the owner of a small business, it is essential for you to be economical over how you handle your finances. One of the primary reasons why lots of businesses don’t succeed today happens to be the misuse or lack of capital. Having said that, saving money should be the first priority.

Of course, some ideas will help you to save more cash as compared to the others.

We have mentioned 7 ways to save cash for your small business.

1. Communal advertising

It is possible for advertising to become quite costly for small enterprises. It might cost a lot of money without enough exposure or large mailing lists. In case you have good terms with the local companies it might be a sensible idea to do advertising together with them.

If possible, mailing lists, distribution channels, and suppliers can be shared with companies providing complementary services and goods. 

2. Make use of website builders

It will be a prudent decision to make use of a website builder instead of employing a developer in case you want to build an online store or a website. Squarespace and other such platforms is going to be fantastic for any owner of a small business who likes to obtain online exposure.

Make use of a platform such as Shopify in case you like to establish an online outlet. You will be able to establish and also operate an e-commerce business thanks to these solutions without almost any technical expertise.

3. Speaking at industry events voluntarily

It will be a good idea to share your knowledge with others in case you happen to be an expert. Speaking at conferences or industry events voluntarily will be a fantastic way to get this done. This will provide exposure for your company as well as the personal brand of yours. 

4. Stay away from full-time workplace space

It is feasible for most of the online businesses to be operated remotely thanks to modern technology. This tip won’t apply in your case if you happen to be in retail. In case you are not in retail, it will be sensible for you to stay mobile whenever you can. Renting an office space can prove to be rather expensive.

In case there is space, make it a point to transform the room in your house into the office space. This will help you to save a considerable amount of money in the long run.

5. Purchase second-hand office equipment

Make it a point to go for second-hand office equipment whenever you decide to move into your office. You will come across monitors, workplace chairs, and other accessories at second-hand equipment outlets at a fraction of the original price.

Although fresh glossy accessories might look nice, an empty bank account will not. Delay gratification and invest your money on what you need only.

6. Make use of contractors and freelancers

It is a fact that you have to spend a lot of money for full-time workers. In that case, you can make use of independent contractors and freelancers initially till you become stable.  

Moreover, it takes money as well as time to train an employee nowadays. On the other hand, an independent contractor will not need any training and is going to charge you only for the jobs done by him.

7. Barter

One of the most effective ways to save cash for any small business is going to be bartering. Almost every other small enterprise is facing a situation like you. All of them happen to be strapped for money. Having said that, it will be a sensible idea for you to barter for services and goods.

In case you happen to be an accounting company requiring design services, it will be a good idea to give an offer to them for managing their finances in lieu of some design work. Try to barter first each time you are in need of any particular service or product. Although it might not work in your case, there is no harm in trying.

There are many things to do in case you want to save money. Some of these techniques are more effective as compared to the others. Having said that, you can always try it in case it helps you to save cash. Hopefully, these 7 strategies mentioned above will come of use to you.

Top Accounting software for small businesses

It is probably a fact that you studied accounting while you were in college. Therefore, what can be done when you are commencing a small business? For this, you will come across the most effective accounting software for small businesses. 

It is a fact that there is lots of accounting software out there. Consequently, it might be quite confusing for you to know which one to go for your personal requirements. Here, we have talked about the top 19 most effective accounting software for helping you out.

What accounting software should be used by you?

Although it will be a good idea to have the list of all the accounting software how can you be sure which one to use for your business? Below, we have mentioned several essential things to bear in mind while looking for effective accounting software out there.  

1. Identify your requirements

Are you in need of any platform which enables you to monitor inventory? Make a listing of all the available accounting software and also prioritize them according to their importance. Try to figure out which one of them will be able to get the job done for you.

Although you might be flexible in this case, it is simple to become distracted by software that is able to solve many requirements apart from the ones you have.

2. Consider your budget

Before proceeding further, try to figure out how much can be afforded by you for accounting software. After assessing your budget, do not consider any software that falls outside it. Even though you might be somewhat flexible regarding this, do not take into account any software which is over 25% of the budget ascertained by you.  

3. Look for features which satisfy your requirements

Do not get starry-eyed when it comes to features. Do not go for software which offers services for international teams in case your business is restricted within the US only. Never become distracted. Consider that software which satisfies most of your requirements. 

4. Ask the proper queries

You ought to ask the proper queries in case you are selecting software requiring a sales procedure. You can ask the following questions:

• How will it be possible to back up system information?

• Is your API secure?

• What other expenses can be expected by me?

• Inform me regarding the customer service. How promptly will I get a reply if a question is submitted by me?

• Does your software have any downsides? 

1. Intuit QuickBooks Online

The pricing of this application begins at $8 every month. It offers services which include around-the-clock chat support, receipt capture, as well as integrations with Shopify, Square, and PayPal.

You can use all the plans for sending invoices, receiving payments, monitoring expenses and income, sending estimates, running reports, monitoring sales as well as taxes, plus capturing receipts. You will be able to use the more advanced plans for tracking time, monitoring inventory, and so on. 

2. FreshBooks

It begins at $15 per month. This software will be appropriate for you in case you are operating a subscription model enterprise or are in need of time tracking ability. You can also view the precise spot where your invoice was opened by a client.

FreshBooks will offer a single dashboard to you for managing your accounting and finances. Secure backups are integrated on a regular basis and it will be possible for you to monitor your business always with the help of a mobile app. 

3. Pabbly

Pabbly begins at $9 every month. This application, which is intended for small-sized as well as medium-sized companies, offers actionable real-time metrics on your revenue, monthly payments, total revenue, fresh subscriptions, and active clients.

Apart from this, it likewise helps to automate all the workflows of your company, client communication, as well as the creation of invoice.  One more notable thing about the software is that it happens to be the only application that doesn’t charge additional fees for monthly generation of revenue and per-transaction.

On top of this, Pabbly supports more than 23 international currencies and massive payment gateways such as Stripe and PayPal.

4. Wave

This software will be ideal for you in case you have only several employees and you happen to be a freelancer. The majority of its services such as invoice management are free. Moreover, your bookkeeping is going to be updated at all times since your info will be syncing with this software.

Nevertheless, you will require different software in case you are in the lookout for inventory monitoring, project management, or built-in time monitoring. 

5. Sage 50cloud

The pricing of this application commences at $50.58 every month. It is ideal for any small-sized company out there. Sage monitors payments as well as expenses, and sends invoices, and therefore, you will finish your administrative tasks rather quickly. However, Sage will not offer you collaboration and time tracking tools. 

6. Xero

Xero’s pricing starts at $9 every month. It might be the fact that the major part of your business is conducted on the go. You will be able to use this software for tracking inventory, sending custom invoices, and creating purchase orders from your tablet or smartphone only.

In case payroll services are needed by you, you need to use them by means of the partnership of Xero with Gusto. Moreover, Xero will not provide you with live support.

7. Zoho Books

Its pricing begins at $9 per month. The most notable feature of this software happens to be its simplicity.

Apart from helping you to manage the finances and cash flow of your small business, it likewise provides fantastic support, the ability to create balance sheets, accept online payments, and so forth. Moreover, the dashboard is quite simple to use.

8. GoDaddy Bookkeeping

GoDaddy Bookkeeping begins at $4.99 every month. This affordable software helps to import information from your bank accounts and also from eBay, Etsy, and Amazon. It puts that information to use calculating tax estimates and creating invoices.

However, this software won’t be ideal for you in case you want to have a solution providing extensive reporting, project management, and global billing abilities. 

9. Kashoo

The pricing of Kashoo begins at $19.95 every month. In case you happen to be a small company and looking for a genuinely simple solution, then it will be ideal for you.

The software is known to provide automated reconciliation, expense, and income monitoring, as well as categorization by making use of machine learning technology. You can also take advantage of an unlimited number of users. 

10.  AccountEdge Pro 

The price of AccountEdge Pro is $399 which you need to pay at a time. In case you prefer using the mobile, then this software will be ideal for you. Double-entry accounting tools which are optimized and also customizable for the desktop users are offered by it.

In case you are in need of a mobile alternative then you can go for the cloud-collaboration option. 

11. OneUp

OneUp is going to cost you $9 every month. It will come of use to you in case you focus on pricing and inventory management. It helps to categorize bank entries, sync with the bank, and validate entries such that it is possible for your books to do accurately and quickly. 

12. Tipalti

Its pricing will be obtainable upon request. In case your business happens to be deadline-driven, this software will allow you to satisfy them on every occasion. It aims to rectify administrative overload, non-compliance, and late payments.

Tipalti will be able to simplify the processing of global payment in more than 190 nations, ensure that you happen to be tax compliant, and also make your payment functioning automated. 

13. OnPay

The pricing is going to begin at $36 per month along with an extra $4 per user. This software will come of use to you in case your small-sized company requires assistance in entering payment information and automating filing of tax.

OnPay will likewise help in managing benefits consisting of health insurance and compensation insurance. It will also be able to take care of tax form filings, estimate payroll taxes, and so on. 

14. NetSuite ERP

You will get the pricing of this software upon request. This product aids in order management, financial planning and management, supply chain as well as procurement. Moreover, NetSuite ERP can be considered in case you are predicting rapid development. 

15. FreeAgent

Its pricing is going to be $12 per month for a period of 6 months and then $24 every month. This software will be ideal for you in case you create plenty of invoices and estimates, monitor cash flow as well as receipts.

FreeAgent can likewise be connected to your bank for viewing profitability and income performance. 

16. Accounting Seed

You will receive its pricing upon request. This software provides recurring billing options, functions with your business for linking crucial business applications, and comes with a reliable and secure API.

Moreover, it happens to be a cloud-based platform which implies that it will be possible for you to log in anytime you like. 

17. Sunrise by Lendio

This software will be available for free. The more robust plans start at $149 every month. Sunrise comes with a collection of features consisting of profit and loss reports, automated bank reconciliation, branded invoicing, and simple tax options.

The most notable aspect of this software happens to be its capability of setting up automated payments and acceptance of credit cards. 

18. Zipbooks

This software is available for free and the more robust features are available at $15 per month. Zipbooks offers you billing and invoicing features like payment reminders and auto-billing for minimizing your admin tasks.

Besides this, their competitive intelligence can also be used for making information-driven decisions regarding your finances. The color-coded UX of the software is perhaps their most significant feature.

19. Holded

Although the pricing is free, the more advanced features will cost $10 every month. Holded is appropriate for you in case you are in need of a comprehensive business management application.

It provides invoicing, accounting, project along with inventory features. Reconcile transactions, connect your financial institution, classify entries automatically, and manage everything in your ledger. 

You would never like to leave your accounting to risk. It will be advisable to purchase the correct software in the initial stages of your business, and you must also upgrade it on a regular basis such that it satisfies the requirements of your company flawlessly. This way, handling your finances is going to become way easier.

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