Now, up to date we have learned the finances, the types of buisness and how to run it, but how do we gain cash for these buisness ideas? There are many ways people may achieve finance for their companies but today I would like to bring forth two ideas :
Debt Financing: This type of finance is money borrowed. This is money you are obliged to pay back by a certain time and date. You will usually incurr monthly interest rates, which may or may not be a fixed rate depending on the type of loan you are taking out.
Advantages of debt financing : You as the owner are able to raise funds without having to give any portion of control or ownership to the public, as you would have to do in Equity Financing. You will also sustain the amount of cash needed to run an operate your buisness daily needs.
Disadvantages of debt financing: Your business is serviced to a debt, and must oblige to all agreements or subject to default on loan. The interest on these loans may be relatively high as well.
VS
Equity Financing: This type of finance is also known as Venture Capital. This type of finance will require making a company public and selling shares and or parts of ownership in order to generate enough funds to start your business.
* Note Venture capitilist always expect a high return on their initial investment.
Advantages of equity financing: The business will not be listed as collateral incase of loan default. You will have suffiecent amount of funds to start up your business, as well as more finance for capital product.
Disadvantages of equity financing: Shareholders have some ownership in the company, and business profits must be given out in forms of dividends. You may also have to provide your venture capitalist with a large portion of ownership rights to all major decisions.
These are some ways to generate enough funds to operate your business successfully. Before opening a buisness you must look at all the cost, and go over it with your financial planner to decide which option is best for you, if you find that these may not be great options for you consider looking into Franchise's which are known as "Put the key in the door and start" business, where all is done for you.
Monday, March 4, 2013
Friday, March 1, 2013
What to know when starting a business
Throughout the past couple weeks I have been blogging to all of you my viewers on the importance of financial literacy. Now with the foundation I have provided for you, we are able to take it to the next step. What do you really need to know when starting a business? Well first you need to decided what type of business you would like to run here are the following types:
Sole Proprietorship : This form of business is usually deemed the "simplest form." Having a sole proprietorship is saying that you and the buisness are one of the same entity, meaning that all your personal assets and or liabilities are all of the same with the business. There are no legal distinctions between the two. If the owner dies, so does the business with them.
General Partnership: This form of business is usually two or more parties creating a buisness in order to generate profit. You can have a silent partner of the business of which they are usually just a cash flow, or a general partner which would share the liabilities and assets with you as a whole. Like a sole proprietorship both partners in a partnership are one with the business there is no legal distinction. When one of the partners die, so does the business.
Corporation: A corporation is different from both sole proprietorship and general partnership, because a corporation is a seperate legal entitity , it is a business made up of shareholders. Having an incorperated business would mean that your personal assets and liabilities are none of the same with your business. A corporation has unlimited life, and its own assets. If the company were to be sued , you yourself would not be personally liable but the company as a whole.
A corportaion is usually broken down into two types of stocks:
Common Stocks: Investment into a company with voting rights in relation to the board of directors
Preferred Stocks: Investment into a company with no voting rights , most have divedend rates while common stocks do not.
I would like to leave you all with the idea of how can you generate income for your business? Once you have decided what and how your going to create your business, the next step is always the cash flow, think of some ways you can generate cash flow for your business.
Sole Proprietorship : This form of business is usually deemed the "simplest form." Having a sole proprietorship is saying that you and the buisness are one of the same entity, meaning that all your personal assets and or liabilities are all of the same with the business. There are no legal distinctions between the two. If the owner dies, so does the business with them.
General Partnership: This form of business is usually two or more parties creating a buisness in order to generate profit. You can have a silent partner of the business of which they are usually just a cash flow, or a general partner which would share the liabilities and assets with you as a whole. Like a sole proprietorship both partners in a partnership are one with the business there is no legal distinction. When one of the partners die, so does the business.
Corporation: A corporation is different from both sole proprietorship and general partnership, because a corporation is a seperate legal entitity , it is a business made up of shareholders. Having an incorperated business would mean that your personal assets and liabilities are none of the same with your business. A corporation has unlimited life, and its own assets. If the company were to be sued , you yourself would not be personally liable but the company as a whole.
A corportaion is usually broken down into two types of stocks:
Common Stocks: Investment into a company with voting rights in relation to the board of directors
Preferred Stocks: Investment into a company with no voting rights , most have divedend rates while common stocks do not.
I would like to leave you all with the idea of how can you generate income for your business? Once you have decided what and how your going to create your business, the next step is always the cash flow, think of some ways you can generate cash flow for your business.
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