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E-Myth – “Why most small businesses don’t work & what to do about it”

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Virtual Accountant | Are There Financing Options For Older Businesses?

A great strategy that many business owners should think about utilizing their business according to virtual accountant, is using financing to fund asset purchases whenever possible, in order to keep cash in their business to use as operating capital. As Robert Kiyosaki, author of Rich dad poor dad said in his book, ìgood debt is a powerful tool, but bad debt can kill you.î By utilizing financing as good debt, business owners can increase the cash flow in their business, which can increase their chances of success. The reason for that is because 29% of all failed entrepreneurs say the reason they failed was because their business ran out of money, making it the second most common reason that businesses fail in Canada. Since half of all entrepreneurs fail within five years, understanding utilizing this strategy can drastically improve business owners chances of succeeding.

One of the biggest problems comes from this strategy, is the fact that the longer businesses are in operation, the higher potential their business has for run into cash flow problems, which makes them less likely to obtain financing. So how can business owners who want to utilize financing in order to help increase the cash flow in their business do this if they are turned down for traditional loans? Virtual accountant says the Canada small business financing program can be a great option for some businesses that have been turned down by their bank. This is a federally backed loan that can help small businesses that make up to $10 million in revenue per year. Since the government is backing the loan, many banks to head to find loans to businesses may be approved under this program.

Even though it is a federal program, entrepreneurs should also understand that this doesnít mean that all business owners who apply are approved. Business owners need to create a business plan with their virtuals accountant in order to have a formal plan in place prior to applying for the loan. This will increase the business owners chances of success in being approved for the loan, and will also give them a plan firmly in place that will help them pay back once they have succeeded in obtaining the loan.

Business owners should also understand that itís also not a no risk loan. Virtual accountant says that banks can still request security on this loan, even a personal guarantee and on the entire amount as well. Entrepreneurs should know that this means if they default on the loan, the bank still may come after them as well as government to collect on it. While this is a great option for many business owners, any time entrepreneurs consider financing, they should do so very carefully and deliberately in order to ensure it is the best decision for their business. This is not a program that everybody should utilize, but for the right businesses it can help them significantly get the assets they need, while helping them stay cash flow positive.

Often, when businesses start out in business, they utilize loans as operating capital, and when they need to start purchasing assets, they are no longer able to qualify for loans says virtuals accountant. Business owners should understand that they start out in business, itís always going to be more possible to finance assets than it is operating capital. Rather than use their cash early on in their business by hard assets, they should learn early on that utilizing financing by assets even if they have cash in their business can be a powerful tool for helping them stay cash flow positive while getting the assets they need in order to run their business.

Unfortunately, businesses have already made this error, or they still need to purchase assets and they are not able to qualify for traditional loans. Consulting with their virtual accountants, many businesses hear about the Canada small business financing program, which is a federally guaranteed loan that can loan business owners up to $350,000 for asset purchases, or up to $1 million in real estate purchases, or a combination of real estate and assets.

Despite the fact that this is a federal program, business owners still have to get approval. The approval process is easier only because the federal government is guaranteeing the loan. Business owners only to approach the bank, and do their due diligence to qualify. One of the best ways they can do that, is by creating a business plan with their virtual accountant. Preparing formal plan is an entrepreneurs best chance and succeeding at getting the loan. Not only does that give them a chance to get the loan, it also means that they have a plan in place of how they are going to pay that loan back once they do get it.

There are interest in application fees that come with this loan. Business owners should be aware that the interest is that this rate of crime +3%, which is currently 6.5%. As the prime goes up or down, so does the interest rate. This means though that is not a lower rate but not a high interest rate either. Business owners should also budget an application fee of 2% which is only implied in the first year of the loan. This is to pay for the amount of paperwork it takes to process and approve the loan.

Business owners should understand that while this is the federal government back the loan, banks are still allowed to request a business owner put some security down on it. Banks can ask business owners to put a personal guarantee on the entire amount if they want. Virtual accountant says that this means even if the business owner defaults, they may still go after the business owner directly for the money instead of the government.

The Canada small business financing loan can be a great option for entrepreneurs who are not able to secure financing in their business, but want to be able to still utilize financing to increase cash flow in their business.