Financing and Credit:
Financing and Credit:
In the beginning of a business, and over time, you may need to borrow money for a short time (revolving credit or short termloans), or a long time (a mortgage, or an equipment loan, for example).
- Given your profit and loss projection from last week, do you anticipate needing to borrow money for any reason? Keep in mind the seasonality of your company. You might make a lot of money in the winter, and have essentially no business in the summer — think of how that is true for a ski resort, for example.
- If you foresee having to use someone else’s money, how do you anticipate getting that? Discuss using both debt and equity financing. Also think about how you can use other people’s money (like suppliers). Be sure to address any bootstrapping measures you might take.
- Even if you plan to keep your business small, imagine what you would need to do if you wanted to grow. This exercise requires you to use your imagination. The only wrong answer for these discussion purposes will be if you state you do not need money now and never will. Even if that is true, imagine what you would do if you needed it.
Can you make response each posted below # 1 to 3?
1.From: Debra Clendenin posted Jun 21, 2018 11:50 AM
The startup of my transport company could happen one of two ways. One option is that I purchase one truck and trailer and run shipments myself until I have enough capital to purchase other equipment and hire additional employees. My second option is to borrow startup capital to purchase multiple trucks and hire drivers. In my eyes the first option gives me time to work the business and know exactly how to operate. The second option gives me more opportunity to make more money faster which is tempting but not always the best move. If I was to borrow money for my business I would start with family. Reaching out to my uncle who has invested in small companies before would be my first step. Next, I would considered reaching out to local car dealerships and see if I can work a deal in trade where I can transport cars for in exchange for use of some of their vehicles until I could purchase my own. I want to monitor my debt to make sure I do not take on more than I can handle. Bootstrapping is another useful tool to help elevate some expense. I could lease my equipment instead of owning. There are many ways for small businesses to get funding just have to willing to put in the time and effort.
2. From: Geneka Lamb posted Jun 20, 2018 8:30 PM
I do not believe that I will need to borrow money when starting my business. I only plan to start it when I have saved enough for all of the equipment. The only additional finances will be things like rent, utilities, and salaries, which will all be paid through the company. Because I live in Southern Utah where it is warm all year I do not believe my business will fluctuate much throughout the seasons. I don’t predict there will be a slow season that I will need to borrow money for.
If I do end up needed to borrow money I would go to my bank. My bank works really well with me whenever I need a loan whether it is for a car, house, or personal loan. They would likely loan me what I need because I have built a reliable and trusting relationship with them. I am good at paying back my debts quickly, which will help me maintain that relationship.
I do plan to grow my business. As my salon grows I would like to expand to nearby cities. I will not open another salon until I have made the profit from the last salon to cover cost for the new one debt free. The upfront expense of the equipment and supplies like hair dyers, flat irons, sinks, waiting area seating etc is what will cost the most.
3 From: Wesley Turner posted Jun 21, 2018 12:02 AM
Given my profit and loss projection from last week’s numbers, I had a very comfortable profit. When it comes to Real Estate, you can have a large amount of overflow, but it is risky because you don’t know what you are getting into you get into a property and look it over. You can hire someone that specializes in inspecting properties. This way you can have an idea of what you are purchasing, before you buy it. Dealing with Real Estate, there is a few things that can be costly that will eat into your profit, but that comes with the business. It can be as simple as a cracked foundation that can cost you hundreds, if not thousands of dollars to repair.
There are reasons that you would have to borrow money for the start up of the business. If you want to be profitable, it would be wise to save the profits that you are making and pour it into the business. In this way, you don’t have to pay interest on the money you use, but you take the risk from the bank and add it to your risk factors, which can sink a business. This is the way I anticipate getting the money. Using debt and equity to finance is something that should be considered when starting a business and I would start off by using a line of credit on my credit cards or take out an equity loan towards my home. I plan to keep my business small, but I am always willing to expand if it calls for it.