Why is borrowing money good for your business?

Debt often has a negative connotation but is not really the complete truth. It is often a good way to raise money in order to enable your business to grow and expand. When it comes to loans there is more options available so you can choose the right option for you. There are different kind of loans but the main ones are bank loans, credit cards, lines of credit and factoring.

Bank loan has a simple concept with fixed amount and fixed time. It is paid monthly with interest rate. The problem is that it is not that easy to get a loan especially if you just have started your business and even if you do bank may require significant collateral. You are probably already familiar how credit cards work. They are mainly used for short-term funding. You should be careful when using credit card not to build up balance too high. Line of credit is a very flexible type of loan. You don't have to take the lump some but smaller amounts that are better suited to your needs. It is only important not to exceed the agreed amount and you pay interest only on the amount that you actually borrow. Factoring is a specific way of financing. If your clients haven't paid, you can sell your outstanding invoices and get the money minus the fee.

In general taking a loan can be powerful advantage for your business. Compared to equity financing you remain in control of your business. Of course lender will want to know about your business practice, strategies and financial viability. They just want to determine if your business healthy enough to make repayments. On the other hand investors will try to influence how the money is spent and how you ran your business. Also you will retain all profit from your business minus the repayment. In that way debt financing can be cheaper in the long run.

Another advantages are quick and easy usually easy access. Borrowing options are usually faster than attracting investors and competition ensure low interest rate. Application process is usually simple. You will have to provide them with some information to prove that your business is financially viable.

Star-up companies usually borrow cash to maintain business operation otherwise it wouldn't be possible to expand. Lines of credit have flexible payment options and it is a great way to build you credit score for creditors in the future. Lenders usually report your timely payments to one or more credit agencies. Another benefit is that your interest rates are tax deductible. It will be deducted from your federal income tax return.

Comments

OTC stocks more difficult to trade and deposit

Mina Mar Group helps micro-cap companies structure their growth. Micro-capitalized companies are those with less than $50,000,000 in equity, sometimes under $1,000,000. Restructuring involves raising money (both debt and stock), and planning how they will eventually harvest that wealth. If you’re a founder or investor, the secret to harvesting your equity is to possess assets with a developed market for their sale; up until recently, that market was the public market. Now, Over-The-Counter Securities (“OTC Securities”) don’t serve that purpose since, unless you’re a tech unicorn doing an IPO, there are essentially no ways to sell the shares you’ve invested in. OTC securities – how they were deposited five years ago. Brokerages all around the country have tightened compliance over the past five years to the point where no one may deposit share certificates into their brokerage accounts, even if they can prove that they paid for them. Consider the following demand from a secondary ...

All-cash, All-stock offer

An acquisition strategy known as an “all-cash, all-stock offer” requires the buyer to commit to purchasing all of the target company’s outstanding shares for a certain amount in cash. It is also characterized as buying all of a company’s outstanding shares from its shareholders in exchange for payment. All-cash, all-stock offers are typically taken into consideration as a strategy to complete an acquisition. This could be an excellent technique the acquiring corporation might use to make the transaction appear sweet and persuade shareholders who are on the fence to accept the sale by offering a premium above the cost at which the shares are now trading. So if it’s that case, if indeed the company was purchased at a premium, then shareholders of the target company could experience an increase in the value of their shares. Even when we talk about cash deals, a stock value for the target firm is discussed, and that value may be considerably higher than its current market price. Therefore,...

Company Disclosures

When we speak about disclosures and what they represent in financial terms, that actually refers to providing the public with all relevant information about a company on time. So relevant information includes facts, figures, dates, procedures, innovation, etc, which means any information regarding a company that can probably impact an investor’s decision. As a result, it is necessary to comprehend that public company directors and officers are in charge of company disclosures and securing investors with complete and valid information. Access to material info enables investors to make information-based investment decisions, which is vital for efficient market pricing and on which state and federal securities are based. Anytime new stocks are issued to the public, the SEC requisite disclosures of relevant financial and business info to possible investors, with exemptions provided for private placements and small issues. Integrated disclosure structure is the name give...

Mina Mar Group

Search This Blog