Virtual Accountant | Using Financing To Increase Cash Flow?
Running out of money is a significant problem that Canadian business owners face says virtual accountant. It happens to be the second most common reason for businesses to fail. If business owners come up with strategies on how theyíre going to guard against cash flow problems in their business before they start their business, they will put themselves in the position to be successful from the start to. By utilizing debt as a tool in business, business owners can avoid running out of money. The way they would do this, is getting financing for all asset purchases, in order for them to keep cash in their business and uses operating capital. The reason business owners need to do this with assets, is because itís far easier for businesses to get approved for assets than it is to get approved for operating capital.
In order to utilize this strategy, businesses should seek out various financing programs that can help them with the help of their virtual accountant. The Canada small business financing program is a federal government program that can help small businesses qualify for loans. It can help them get up to $1 million if they are looking to purchase real estate, or a combination of real estate and assets. If business owners are only looking to get financed for assets or leaseholder improvements, they can get up to $350,000. Business owners should know that all these things are on the list of approved loan uses, a business owner is not allowed to fund websites, advertising or marketing efforts, paying for their payroll, or operating capital.
Even though this is a federal government program, it does not mean that it is a guaranteed loan. Business owners still have to qualify for it, by taking the application to the bank, and banks can still request security on. Businesses can ask to provide a personal security on the entire amount of their loan, which means if they default, and the bank may go after the business as well as the government to get their money back. In addition to that, business owners also need to understand that they should increase their chances of getting approved by creating a formal business plan with their virtual accountant. Thereís many benefits of writing up a business plan, especially prior to applying for loan, as it can help ensure a business owner can get financing in the first place. Once they get financing, a great business plan will detail out to the business owner as well as the bank their plans for paying it back to ensure that itís possible.
By utilizing non traditional financing methods such as the Canada small business financing program, business owners can be more likely to utilize good debt is a powerful tool to increase the cash flow in their business, to help them grow their business, and avoid running out of money which has caused 29% of failed businesses to close.
There are many challenges that businesses face says virtual accountant, running out of money is the second most common reason for businesses to fail in Canada. Half of all entrepreneurs end up closing the doors within five years, so businesses need to be very aware of what they can do in order to avoid this situation. One way is to utilize financing is a way of increasing cash flow. Since it extremely hard for businesses to qualify for operating capital and much easier to qualify for assets, business owners can apply for financing anytime they need to purchase assets, whether they have money in their business or not. That way they can keep the money that their bank account in their bank and utilize that as operating capital. This works much better than if business owners use all of the cash in their business and then need operating capital and try to find loans that can help qualify for that operating capital.
Business owners can utilize programs with help of their virtual accountant such as the Canada small business financing program can help them qualify for loans traditionally they would not be able to. How this works, is the federal government ask as that businesses guarantor for the loan. This can help several businesses, such as entrepreneurs that have previously maxed out there loan amount, businesses that have a cash crunch potential in their business, entrepreneurs who need to fund more risky projects, or have a riskier business, or entrepreneurs that are new and have no history with financing in their business yet.
One of the biggest disadvantages of this program is since it is a federal government program, many banks donít want to have to coordinate with their federal government, and work outside their usual paint processes. It often takes far more paperwork, far more time in order to process the loan, which banks especially large ones may not be interested in doing. They may refuse the application outweighed, or they may request such a high security on its that business owners would be at a disadvantage to accept it. The good news know if this is that smaller banks and credit unions are the most likely to accept these loans because they are less worried about working outside of their processes and they set themselves apart by doing traditional banks wonít do.
Business owners need to understand that even though the government is guaranteeing the loan, that doesnít mean there is no risk for the entrepreneur. Banks can still request security on it such as a personal guarantee on the entire amount of the loan. If the business owner defaults, the bank can go after either the business owner or the government. Business owners should consult with their virtual accountant to see if this is a risk they should take.
Business owners should also understand that while they can purchase assets or leaseholder improvements and even real estate with this, items that cannot be financed with this Canada small business financing loan program is websites, payroll, advertising and marketing programs as well as operating capital.