Virtual Accountant | Increasing Cash Flow By Utilizing Financing
Increasing the cash flow in business is significantly important says virtual accountant, because the second most common reason for business failing in Canada today is running out of money. Half of all entrepreneurs close their business within five years, and 29% of them say running out of money was the reason their business failed. Increasing cash flow in business can be done through a number of strategies, by utilizing that in order to increase their cash flow. This was mentioned in the book Rich dad poor dad which is written by Robert Kiyosaki who said ìGood debt is a powerful tool, but bad debt can kill youî. Entrepreneurs finance all asset purchases, where they need financing or not, in order to allow their cash to stay in their bank account where they use it as operating capital.
In order for this method to work, business owners need to explore all of the different financing options that are available to them. Consulting with virtual accountant can help businesses track down different financing options such as the Canada small business financing program. This is the federal government program they can help small businesses qualify for loans. The businesses that can utilize this program need to be small businesses that make no more than $10 million in revenue each year. This extremely wide threshold of businesses who qualify is done on purpose, so that the federal government in the help as many businesses as possible. It works, is by having the federal government as the guarantor for businesses, so that they may be able to qualify for loans when they previously hadnít.
There is a disadvantage to utilizing this program, which is large banks often donít want to do the work involved. Virtual accountant says that banks to do significantly more about the paperwork for this loan been traditional loans. And in addition to doing more work, business owners must work outside the typical scope of what the bank will do in order to secure loans, as well as coordinate with the federal government. Larger banks donít always want to deal with this hassle, so they may either deny working with business owners on this type of financing deal, or they ensure the security that they request from the business owner is so high that itís not really in the business ownerís best interest anymore. A great way to get around this problem is by approaching smaller banks or credit unions, because their bank processes can be different as well as their mandate. Business owners should try starting with ATB or Servus credit union if they are in Alberta.
By utilizing this financing, business owners can help keep the cash flow in their business positive, by allowing that the money that they have the bank can be used towards operating their business. By mastering this method, business owners can increase their odds of running out of money in their business, which is the second most common reason for businesses to fail.
Since running out of money is the second most common reason for entrepreneurs to fail in business in Canada today confirms virtual accountant, entrepreneurs who want to avoid this problem, should be proactive in ensuring that they increase the cash flow in their business. One of the ways that business owners can do that, is by financing asset purchases, especially if they have the money in their bank account to purchase it out right. The reason for this, is so that they can keep the cash in their business or they can use it to operate their business, while still going through the asset purchase that can help them operate their business and grow it.
One way that business owners can ensure they can qualify for financing in order to use this strategy, they work with virtuals accountant, find out about the Canada small business financing program. This program uses the federal government acting as a guarantor in order to qualify for loans. This can be great news for business owners, a disadvantage of it is that since there is significantly more paperwork that goes into processing this loan, many large banks are not interested in helping business owners security. Additional work, coordinating with the government and working outside their typical scope of the business is something that is often outside of the large banks ability. However, business owners should understand that smaller banks or credit unions have different processes in a different mandate, and can often help out where large banks canít.
Business owners tend to think that since it is being guaranteed by the federal government that this is a risk free loan. While it used to be, it is no longer the case. Business owners working with virtual accountant need to understand that banks can still request security on the loan that can involve a personal guarantee including the entire amount of the loan. Therefore, if the business defaults on the loan, the bank may come after them as well as the government.
Just like a typical loan, interest charges and loan application fees will apply as well. Virtuals accountant says that business owners can expect a very midrange commercial loan rate of prime plus 3%. In addition to interest, a loan application fee of 2% in the first year helps banks pay for the lengthy process that took to qualify for the loan.
Entrepreneurs often want to know how much money they can be financed for, and as long as businesses are using the money to finance hard assets or leaseholder improvements only, they can get up to $350,000. If they are planning on buying real estate, they can secure up to $1 million for real estate, or real estate as well as hard assets and leaseholder improvements. By working with their virtual accountant, business owners can work out how much money they need to loan and for what makes of things.