As a professional subject matter expert, I have offered finance assignment help online to individual students for quite some time. Each time they come up with a new topic and ask for personalised support online. Recently, it was all about the importance of financing for small businesses. I thought of sharing the same with other readers as well. If you are among them looking for assignment experts, carry on with the reading task and seek inspiration as it appears relevant.
Before we start, let?s take a look into the primary reasons which make it evident for a business to seek financial aid:
- To purchase assets: For a business to run seamlessly requires the management and owner to invest in necessary assets. This includes things like IT equipment, digital tools, machinery, and vehicles. The relevance of invested assets keeps changing from one industry to the next. And it is on the management how they wish to plan the entire thing.
- To gather working capital: The second in our list is the necessity of gathering working capital. What are the things that come under such a range? Here is a complete list making things easy for you to decide.
- Inventories
- Accounts payable
- Accounts receivable
- Cash in hand
The relevance of working capital lies in the fact that it is used to cover day-to-day expenses. Thus helping the management make daily payments to the on-site labours and monthly payments to the employees and arrange for the other knicks and knacks.
- For further expansion: When a business is established to a certain extent, funds are required for further development. This can be done by purchasing more vehicles, expanding to a new location, or hiring more employees. However, when seeking Extra funds, businesses need to showcase proven work proposals with minimal risks.
- Research and development: At times, companies must employ researchers and a dedicated development team before they expand into a new horizon. This is specifically evident for companies in the pharmaceutical sector and others indulged in offering customer care sectors.
- Property-related investments: As per research, most funds are needed when a company is planning to expand to a new horizon and is looking for new plots to purchase or invest in.
What is a small business?
Moving forward, let?s focus on the concept of small business and find out why it is essential for them to receive funds on time.
A company with less than 50 employees or less are termed a small business. There are different types of finance that a small business requires to operate. Also, it is required of small businesses to reassess the suitability of their current finances and structure the available funds as appropriate.
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Here is a list of fund options that small businesses require to consider:
- Business angles: The concept of business angles is of utmost importance when a small business plans to expand in a new venture and needs consistent support other than regular funds. There are specific associations offering the correct type of support. However, one must choose wisely.
- Factoring of invoices: Mostly common among businesses with immense working capital tied up with the debtors. Also, growing businesses seeking to monitor their working capital use the same. Examples – engineers, recruitment service providers, transport companies, and whole sellers.
- Financial support from family and friends: Startups often take up financial support from their family and friends. As per research, it has been proven that one out of ten startups chooses their family as the banker.
- Grants: Project-wise grants are in trend nowadays. These funds cover almost 15% to 60% of the entire project. Startups take such appointments to get going with their latest ventures and other work-related commitments.
- Lease: Small businesses do seek financial help for leasing machinery of relevance. These include construction, plant hire, manufacturing, transport, engineering, professional services, and road freight. Also, other equipments like photocopiers and in-house machinery are taken into lease similarly.
- Small businesses require bank loans as their startup capital or while venturing into long-term purchases. This is the most secure and seamless way to arrange for funds within a short period. However, background checks are mandatory for a bank loan.
- Trade credit: It is an easy and viable option for small businesses. In simple terms, it can be elaborated as the process of availing goods and services on a business name without making payments immediately. It is quick and the easiest way to arrange.
- Overdrafts: Within this arrangement, small businesses get to arrange working capital as a backup for unplanned expenditures. This type of finance is usually availed of by companies that go through fluctuations in working capital.
Financing Benefits and customer sales for small businesses
Here is a list of the various benefits of financing:
- Helps with the enhancement of the order values: Businesses can leverage finance programmes for upselling customers and thus enhance order value in return. To enhance the transactions caps by individual customers, help them see how a slight increase in their monthly payments can make all the difference. Example: show them how by paying $20 extra, they can make a change from marble top to soapstone.
- Boost sales: With financing, you will be able to close off more sales from time to time. Customers do prefer financing because this way, they get to avail of extra buying powers. As per studies, total sales increase by 32% when customers are made to avail of point-of-sale financing programs by their companies.
- Attract new customers: With micro-financing options, small businesses get to help their customers purchase future-appropriate assets without having to spend much at a time. This way, everyone gets the chance to avail of goods otherwise out of their league for so long. And businesses notice an increase in customer influx.
- Enhance cash flows: Also, various third-party vendors are available out there, offering smart financing options for small businesses. These ensure the swift flow of cash between the various entities linked together.
- Bag repeated business: Lastly, accurate financing programs help small businesses build up their brand loyalty and attract customers on repeat. Once customers are thoroughly accustomed to your financing options, they will start getting back to you from time to time.
Things to be careful of while seeking external sources of finance for your small business
The list goes as follows:
- Take note of the company status: The companies or banks offering swift financial support often come up with obligations where the funds are only made available to large businesses. So when looking for investors, have your research handy and approach the ones fulfilling your immediate needs. Do not approach and seek help from those who restrict small business finance to short-term borrowing.
- The currency you are availing of: It is important to be careful of the money when boring a certain amount. As you will have to repay the same along with the interests attached. A shift in the currency value will add to the loan cost and risks involved.
- The duration of the loan: The duration of the loan will help you plan other necessary payables in hand. Remember the textbook rule ?Short-term investments require short-term funds, and long-term investments require long-term funds.?
- Be careful of the fixed and floating rates: Floating rates are generally cheaper when seeking finance options for your business. On the other hand, fixed rates can be heavy at times.
- Debt covenants: Make sure you have cleared it out with the loan provider that they do not possess any limitation on the assets purchased over the granted money.
Final Thoughts
So that was all, helping you out to focus on the essentials of financing for small businesses. Whether you are a student or an emerging entrepreneur, make sure to get your research game on and proceed accordingly.
As the editor of the blog, She curate insightful content that sparks curiosity and fosters learning. With a passion for storytelling and a keen eye for detail, she strive to bring diverse perspectives and engaging narratives to readers, ensuring every piece informs, inspires, and enriches.
