About Business Financing
When it comes to start-ups and entrepreneurships, there are a lot many things to learn about and get accustomed; not the least of which is the financing aspect of things. After all, if you are opening a business for yourself, what will be the source of all the funds required for it? Where is the money going to come from and how should you deal with it?
That is exactly what I will be trying to answer to you today. Having learnt a few things related to commerce and finance, I feel like I can give you reasonably good advice and solid information regarding the things that you want. So let’s begin with discussing some of the sources that you should know about with regards to funding your business.
The Sources of Income
So, what are these mysterious sources of income that I have been talking about you ask? To put things into perspective, there are a total of 3 main categories in which you can divide said sources.
- Short Term Finance
- Medium Term Finance
- Long Term Finance
In order to discuss more about what they actually are and how you can consider taking advantage of them, we first need to talk about their basics. So let’s do that.
- Short Term Finance
This kind of financing is based on the absolute current needs and demands of the company rather than future ones. If there is something that needs to be meted out now, then now is the time to take care of it. It is definitely effective in terms of efficiency since completing each problem as it comes will make sure that there is none left for tomorrow.
You should have no problems understanding the core concept of this approach. But why you are probably more curious to know are the sources that account for short term financing. Some of the most relevant ones are as follows:
- Bank Overdraft:
This method allows users to draw more money than there is in his or her bank account. It is easy for them to meet their emergency expenses in this manner.
- Customer Advances:
There are plenty of customers who are willing to invest some extra money in lieu of the services they will receive in the future. Such advances from customers are a pretty big source of income for small business in particular.
- Financial Institutions:
There are also plenty of independent financial institutions which provide monetary support to those who need it through loans and other types of assistance.
This kind of approach is good if the money required is towards the lower side of the spectrum. It is also good for emergencies that you could not have foreseen.
- Medium Term Finance
These are expenses that you think your business will be requiring in the immediate future. Usually, that refers to around 1-5 years of time. So if there is something you think you will need to spend during that timeframe, this medium term approach is probably the best way to go about it.
What most companies and organizations use this for is balancing out their establishments. Once a company reaches a certain level, it is important to make things stable and iron out the irrelevant things. So stuff like buying and replacing machinery andengineering the different projects are all things that would fall under this category.
- Hired Purchase:
This basically refers to buying your required things on instalments instead of doing it all at once. This ensures that the business gets all the equipment of choice all while paying out the debt in feasible amounts.
- Commercial Banks:
They are probably the biggest source of medium term financing. The loans provided by them suffice the requirements of your business at all time periods.
- Insurance Companies:
These are also financial bodies that provide a large pool of funds and contributions to your need. Most businesses use this approach for their financial support.
This approach is best for business and firms that are relatively new in the industry but have a decent amount of experience. This way, both the requirements as well as the financial demands can be met.
- Long Term Finance
As you can probably guess by now, this type of finance refers to those which hang on for more than 5 years of time. The ones required on a permanent basis also fall under this category. More often than not, these are used to change something structurally in the company. Such changes are permanent most of the times and are basically used for long term needs.
Some of the sources out there which count as long term financial support are as follows:
- Equity Shares:
Quite possibly the most widely used method to generate long term financing options has to be that of equity shares. They are generated by the public to increase the capital foundations of large scale businesses. The shareholders partake in the profit and loss.
Leasing allows for a lot of flexibility, especially when it comes to dealing with equipment. The best part about it is the fact that there is no heavy cash outflow in this procedure which makes the overall procedure pretty smooth.
- Retained Profits:
These are earnings which are usually generated from any sort of excess profit made from the business itself. It is retained and used only during times of emergency and immediate requirement.
If you want some permanent changes in your organization that will have a long-lasting affect overall, then this is the approach that will probably suit you the best. It is effective, it is safe and moreover, it is secure. Now that you have understood all the 3 approaches, make sure that you pick the best one required for your own business.
Some of the viral financial trends of 2019
Technologies are changing constantly in response to the way consumers have been interacting with various financial sectors.
With broadband facilities available in almost every household, the millennial generation hardly feels the urgent necessity of visiting banks monthly to keep a note of their expenses. Various financial companies have this taken a beating and thus they need to upgrade themselves technologically in order to stay relevant.
Financial trends have always been on rolls and with the ever-increasing tensions among inter-nations, there are few strategic positions that one must maintain to allow smooth influx of revenues. Some important planning trends are discussed in the following passages.
Some of the trends below will provide insight as to how companies reach its customers financially in 2019.
- Omnichannel marketing is gaining relevance day by day. Extra effort is being put in luring website scrolls, by highlighting their points of interest. Ads are being strategically placed at top of websites where it is easily viewable.
- Blockchain aided interactions are being implemented by many financial sectors. Blockchain keeps records and provides a scope for maintaining secured interactions between two interested parties.
- More database oriented financial policies are being used, to access history of the companies instantly with a few clicks.
To increase longevity planning’s must be done keeping in mind long-term goals. Currently life expectancy of men averages 65-84.3 and that of women averages ‘65-86.7.’ thus, the real question arises. Can one sustain that long without incurring debts? There is urgency the need of managing costs and curb needs to thrive properly in nineties.
The implications of planning are such that it makes sure that one does not outlive their portfolios. Many factors come into play as one age. There are complications such as diminishing of mental health; there might be a necessity of coordinating minimum distributions that too from multiple accounts and many more.
One has to keep in mind the necessity of funding on a long-term basis, regular bill payments, giving proper response to caregivers that could turn out to be incapacitated. So, these issues of aging must not be left mainly in the back of your head.
One must hold regular discussion with their spouses what they need to follow in order to live a healthy life in their old age. It’s always preferable to put forth the plantings in place even before there is any actual need to act.
There might be some financial complications if your marital life takes a hit. Be it divorce or planning for second marriages, all the e3stimation of resources must be kept in mind. On a positive note couples are more focused on their future and they are ready to balance their expenses keeping in mind the need of balancing legacy during their children’s need.
Planning challenges might kick in, if proper palling is not done beforehand. There are a lot of legal as well as estate planning techniques which are designed so as to solidify the intentions of the couples.
Many potential beneficiaries are secured of their wealth with the help of various life insurance schemes. The fact that both men and women are not taking their responsibilities equally is quite welcoming.
They both are now inclined towards securing a better future for the family keeping in mind all the uncertainties. It’s a positive sign that there are so many new investment tools and planning techniques that are coming up regularly. These schemes are really helpful in maintaining a harmonious family structure and to plan for a better future.
With the advent of new technologies in 21st century, management roles have become quite easier and dynamic. Pone can simultaneously balance both complex and mundane ever-increasing financial risks if they can make use of the apt technology in hand. Be it tracking, spending or providing the required dates for real time investment policies, most of the investors are now taking aid of technical advancements. All these polices are of greater concern to families who are widespread geographically.,
With the help of electronic vaults, one can both collect and store important documents that they need. With the help of various online wealth portals, the whole household can share their expense. Thus, with the aid of their technologies, one can now focus more on their career or job and save the tie required daily for the need of managing fortunes.
Workforce diversity has increased on a significant level those previous generations. Nowadays there are a greater number of people working an extra hour and even beyond their age of retirement to sustain the ever-increasing expense rate of their families.
To cub expenses, it is now evident that there are a greater number of people focusing more on their career and reaming single for the better half of their lives. Millennial generation that is going to follow will definitely benefit from the increasing turnover and more balanced lifestyles.
All these trends suggest how one would choose to work and remain in workforce. With the ever-increasing diversity of workforce, more and more companies are recognizing the need to make more differentiations and choices which would be meaningful in providing benefits for wider range of family issues.
Tax laws are no longer the same. There are a lot of new upgrades which have taken place due to the passing of Job Act and Tax Cuts in 2017. Some attentions have been duly paid on the way tax treatments of real estates. What many are unaware of is the passing of Investing in Opportunity Act. It can introduce during Opportunity zone program. This act helps in curbing tax expenses for major investors who are in potential need of benefiting for economically distressed communities.
Final rules are gradually rolling out and there is an incurring interest for these programs. Provisions are being provided to either defer or eliminate taxation based on capital gains after one qualifies for investments of real estates. This law is targeted potentially towards private taxpayers of specific economically developing regions. With the advancement of this law, there are many opportunities for potential Fund raising on a sustainable basis.
MajaKazazic gives necessary inputs for financial help to the students. He works at helpmeinhomework with 6 years of experience. He has an MBA degree and specialises in identifying potential of the students who seek help from him.