Thursday, January 31, 2008

My experience with finance is mostly in the corporate world. If you're looking for venture capital, angel investors, or someone to help you with your business planning, I'm your go to person.

Now personal finance is something different. This year I decided I was going to learn more about how to invest and where. I'm a long way from retirement but one thing I've learned is to plan ahead. I found a informative website called The Money Alert. It's not hard sell. The last thing I need is some broker breathing down my neck telling me his/her latest and greatest stock tips. And if I don't invest everything I have right this minute I must be a total fool.

If you're looking for information on investing the site has lots of articles in easy to understand terms. No mumbo jumbo. The site is organized into several categories from planning for college to planning for retirement. There's also articles about insurance, investing, and estate planning.

I've bookmarked the site and plan on spending some time there.


Saturday, January 26, 2008

Will a Business Plan Help Me Obtain Financing?

If you’re looking for credit from a vendor or service provider, probably not. But, and it’s a huge but, if you’re looking for a bank loan, absolutely yes.

Bankers can be nervous little critters and need to be assured of two things:

1. Your company is stable and has enough cash flow to pay back the loan with interest.

2. The owners of the company, that’s you, has the intention to pay back the loan.

A business plan demonstrates that the company has the assets in place to secure the loan if all else fails. It also shows that you, as the owner, has the foresight to plan ahead. The business plan gives the banker just about everything they need to know about your company.

What should be included in a business plan? It’s not a complicated document to put together. You’ll need an executive summary which should be about two pages long and is just, as the title says, a summary of your plan. Also included should be an overview of the history of your company, its industry, the market, competitors, the products, and marketing strategies. The business plan doesn’t have to be 300 pages long. As long as all the required information is included it can be 10 to 15 pages in addition to the financial statements.

The business plan also includes the historical financials for the last three years and projected profit and loss statements, balance sheet and cash flow projections for the next three years. If the historical statements can be put together by your account so much the better.

Have the plan copies on good paper. You can print on both sides of the page if the paper is heavy enough in weight to stop the bleed through to the other side. It’s not necessary to use a gold embossed leather binder, but do use a new binder.

Sunday, January 20, 2008

So Many Choices So Many Credit Cards: How Do You Choose?

You need to ask yourself several questions to decide what kind of card is best for you.

What will you use the card for?

If it's for every day purchases and conveniences then a card that has rewards might be more attractive to you. Some cards offer a yearly summarization of purchases by category which can help you budget as well.

Will you pay off the card every month?

If so, a high interest rate isn't as important since there won't be a balance. Try to get a card that doesn't charge an annual fee. You also want a card that doesn't charge interest from the date of purchase, or one that has a grace period of up to 30 days before interest charges begin. If you carry a balance every month or plan on transferring another card's balance to your new card, then low interest rates are important.

Will you be using the cash advance feature a lot?

Then obviously you want a card that doesn't have restrictions on how much or how often you can get cash. You also want a card that doesn't have additional fees associated with cash advances, or a per transaction fee. Some credit cards also charge a higher interest rate on the cash advances to compensate for missing the merchant fees from purchases. Many cards apply payments to those charges that have the least amount of interest being generated first and don't apply the payments to the cash advance portion until everything else is paid.

Do you travel?

If your schedule includes a lot of travel you might want to consider a card that has a cash back feature. Hotels, restaurant meals and airline tickets can add up fast. Of course keep in mind the interest rate as well, unless you pay off the balance every month. Some airlines offer their own branded credit card under the Visa or Mastercard logo and then offer bonus mileage whenever you use their card.

When you apply for a credit card no matter which one, you need to look carefully at and understand the terms for the credit card. Make sure you know what the interest rate is, the annual fees, transaction fees, and any balance transfer fee. It's also important to know when the interest charges start, how a late fee is calculated and the penalties if any of late payment.

Friday, January 18, 2008

A Few Different Kinds of Business Credit

The choices can be confusing so here are some basic definitions.

Store/Vendor Credit

When businesses need to buy office supplies, products to resell, or materials to manufacture products, they often purchase them on credit terms. The terms give the business from 30 days to 90 days to pay for the materials. Sometimes the company offering the terms will add a finance surcharge to the total purchase, or offer a cash discount, if payment is made within a certain time frame, say ten days.

A credit application can be required to obtain the credit and a credit report as well. Occasionally the store or vendor doesn’t require anything and will just bill the business for the merchandise or service.

The US Postal Service doesn’t offer any sort of credit to businesses for delivery services but many other delivery companies do.

Business Credit Cards

Are issued to the business and are used much the same way as personal credit cards are. They’re helpful when nothing but a credit card is accepted such as car rentals or hotel stays. The interest rate is rather high just like personal credit cards. Business credit cards can be helpful when tracking business expenses, travel for example and separating it from personal expenses. It also eliminates the need for expense reports if you use the business card and not your personal credit card.


Consignment is simply offering goods for sale that you don’t own. The goods are provided to you on credit. The catch is that you pay for the product only when and if it sells. If it doesn’t sell you return the product to its owner. This works most often in retail establishments. An agreement has to be signed with the owner of the merchandise with the consignment terms. The business pays the owner a percentage of the retail price and retains a commission for the sale. The commission can be up to 40% of the retail price. The entire bookstore industry is set up on the consignment system. Bookstores have up to 90 days to pay for books and can return them up to one year if they don’t sell.

Tuesday, January 15, 2008

Is Credit a Good Source of Cash for Your Business?

If used carefully credit can be a good source of cash. You can use a revolving credit line to pay for your needed inventory in June and July and start paying the credit line back down in August, September and October. The trick is you can’t start looking around for a credit source in July. If you’ve done your cash flow projections you’ll know what your requirements are in enough time to find the credit source you need, at the terms right for your business.

Credit, of course, can be used for emergencies such as repairing broken equipment. Or to pay a one time yearly expense and then spread the credit payments over the entire year.

It can also be used to help a company grow.

Introducing a new product almost always take longer than anticipated. Reaching a new target market requires patience, time and money. There can be delays in regulatory approvals, getting a patent, acquiring licenses. Moving to a new facility may mean additional unbudgeted expenses.

Credit, used carefully, can help solve these situations and others. It can be a cushion against the unknown and a good financial management tool.

How Much Cash for Your Company Do You Need?

As much as I can get, would be the answer from most small businesses and entrepreneurs. But not enough cash or too much can have serious negative consequences.

Not having enough cash on hand or available can cause problems ranging from losing a substantial sale because you don’t have the cash handy to buy the necessary materials to fill the order to having to shut down the company because you can’t make payroll. The remedy to the problem is to apply for additional credit and some credit sources will interpret that as inept management. They may ask themselves why you weren’t able to correctly forecast your needs in the first place. Or even worse, that you aren’t fiscally responsible.

Getting more cash or credit than you need may seem like a good idea but it can lead to a cavalier attitude toward expense control. “If you’ve got it, spent it,” is not a suitable motto for any company. And credit costs money, if you use credit to pay for expenses that you have adequate cash for, you incur unnecessary interest expenses.

So how do you know what level of credit is just right for your business? That’s what cash flow projections are for. Every business owner should sit down once a month and project their cash requirements for the next six months. For example: You may know that the summer months are your busiest months. Sales will double for the months of June, July, and August. But since you offer 60 day payment terms to your customers, you won’t see that cash starting to come in until August. And you’ve had to fund, somehow, the sales for June and July.

Friday, January 04, 2008

Make a fresh start in 2008. A fresh start in your personal relationships, with your family and your business. What’s been holding you back? Why aren’t you building your business as fast as you would like? Have you been wasting precious hours on activities that don’t turn a profit? Frittering away your time by checking email over and over, visiting favorite forums and discussion lists? Or maybe just sitting there wondering ‘what do I do next?’

At the end of 2008 what will be your accomplishments? Will it be the same old, same old, or will you be able to say 2008 was your most profitable year ever?

A business plan isn’t just for bankers and investors. It’s a management tool that simply tells you where you’ve been, where you want to go, and how are you going to get there. Realistically a business plan can be used for any part of your life. Think about it. If you’re starting a diet, it’s important to know what your eating habits are (that’s the “where you’ve been” part of a business plan.) You then set goals for weight loss, say 20 pounds in six months (that’s the “where you want to go” part). And finally you determine what specific strategies and action plans will achieve that goal (“the how are you going to get there” part.)

You can be an Internet marketer, a writer, a home business person, or involved in the corporate world. You still need a business plan.

One of the best business plan packages I've seen is Business Plan Basics. You get an ebook on what should be included in your business plan, examples from business plans, tips and an Excel spreadsheet.

If you want 2008 to be great, get started on your business plan with Business Plan Basics.