Outsourced CFO | Needing Financing Assets?
Outsourced CFO | financing assets in your business
Now that you know that 50% of most businesses have closed their doors within five years says outsourced CFO. This can be unavoidable problem, by helping entrepreneurs understand business financing, and how to utilize that in their business to increase cash flow. One of the ways that they can do this is by using financing to fund their hard asset purchases in order to free up the cash that they do have in their business uses operating capital. This is easy to achieve, business owners just need to know how to utilize financing this way.
The first thing business owners should know when it comes to financing assets, is the earlier on in the business that they can apply for financing the better. Ideally, business owners should obtain financing for their assets with the initial purchase of their business recommends outsourced CFO. The reason for this is because banks see it as a lower risk to approve financing for businesses early on. As a business operates, they have the potential to run into a cash crunch, which will make it more difficult for a business to pay back the loan, therefore options are more limited later on in the business cycle. By being able to maximize the cash flow earlier on in the business, business owners avoid a cash crunch later.
The next thing that this owners should take into consideration when they are applying for financing, is it is definitely possible to get 100% financing for some purchases. 100% financing is definitely in the business ownerís best interest, because that will allow them to free up the maximum amount of cash they have. The most common assets that are possible to get hundred percent financing or as equipment, vehicles and buildings.
When business owners are considering different financing options, they often look for the lowest interest rate which is important says outsourced CFO, but they should also take into consideration the amortization period. The reason for this is a low interest rate does not help a business owner if the amortization rate is very short. Business owners should aim for the longest amount of time they can get to pay back the loan – for example 20 years – in order to maximize the amount of cash they have in their business. The longer they have to pay back that loan, means less of their money that going to debt servicing, and more cash that can stay in the business.
Something else business owners should take into consideration is the differences between leasing and financing. Often business owners think that leasing is a good option says outsourced CFO. While leasing hard assets can be a good second option if the business was denied for financing, it shouldnít be the first choice for businesses. If a business owner cannot get financing and is considering a lease, they should always be aware of the lease rates, and make sure that there is no financing charges added onto the lease rate at the very end of the process.
By understanding how and when to apply for financing, business owners can make the best choices for their business that can help them as cash flow in their business, which will help them avoid the problem that 29% of businesses face which is running out of cash.
Outsourced CFO | financing assets in your business
Some of the problems that business owners run into when getting financing for their business is they either canít qualify for the loan, canít get the loan quickly enough, or canít pay the loan once they get it says outsourced CFO. Understanding how to properly go about getting business financing within their business, can help business owners make informed decisions.
Since business owners say that not being able to qualify for a loan is one of the top reasons they were unable to use financing. Helping business owners actually qualify will mean a world of difference to those businesses. The first thing a business owner should understand when it comes to qualifying for a business loan, is it is much easier to apply for a loan the earlier in the business life as possible. Ideally at the same time as purchasing the business. As the business operates, they run into cash crunch potential, which makes them less attractive to banks to finance. Since a brand-new business has not run into that cash crunch yet, they are more likely to get approved for that financing doesn’t need Outsourced CFO.
Something else that business owners should take into consideration to help them get the loan in a timely manner, is knowing how long it takes to get approved for business loan. As opposed to personal loans, that can take between two weeks in a month to close, business loans are for more complicated. A typical threshold is 60 days, and that is if the banks donít require any additional information. Since bank is trying to understand the entire business, itís very likely that they will require more information at some point during the process. They may ask for formal appraisals of the business, or environmental assessments, those reports can take up to 30 days, which means a business loan is now at 90 days to get approved. If business owners can understand how long it takes, then they will be able to make better decisions on when they are applying for that loan and use it to get the best Outsourced CFO in The Country!
The third problem that business owners say they had with business financing, is being unable to pay the loan once they get it. Understanding the difference between amortization periods and interest rate can help business owners make informed decisions about what financing they would like to proceed with. Instead of merely looking at the interest rate the loan, business owners should take into consideration the length of time they have to pay back that loan. A low interest rates and a short period of time to pay back the loan might mean that the business has a harder time paying back that loan as they run into that cash crunch. Better option for them may be a slightly higher interest rate but a much longer amortization period. By taking a longer time to pay back the loan, the business owner is less likely to run out of cash to pay that loan and to operate their business.