Starting your own business can be daunting but the rewards are worth it. Choosing the right finance vehicle for your organization, whether you’re a startup or have been in business for a while, is crucial for the growth and success of the business. Ensuring your organization has the cash flow to meet your trading requirements and to take advantage of various financial opportunities can mean the difference between a highly successful organization and one that fails. There are various forms of business finance available, each with its own set of advantages and disadvantages and as an entrepreneur, it’s important to investigate the various different types of finance to ensure you get the maximum value for your money. For an introduction to start-up financing, sign up for the Finance Boot Camp for Entrepreneurs course. This course will help you create a solid financial plan for your company. The course includes information on how to construct a financial model with metrics, how to create a funding strategy for your specific company, how to create a list of capital sources and how to create a plan of action to ensure you are able to find the funding you need to make your dreams a reality.
There are a number of different vehicles you can use to raise the finance and capital you need to start and grow your organization. Asset finance, often referred to as asset backed security or ABS, is simply defined as using assets as security for a particular loan.
There are a number of different types of assets that can be used as security for the loans and generally asset finance is classified according to the type of assets used as security for these loans. The most common forms of asset finance include:
· Home Equity Loan
· Equipment Leases
As a start-up, it is really important to understand the various forms of finance and accounting. Sign up for the Finance and Accounting for Startups course for a great introduction to all of these concepts. This course contains over seventy five lectures that explain basic accounting concepts. It will teach you the difference between standard and non-standard financial reports. It will show you how to raise capital for your business and it also explains the process of taking a company public. The course explains the various exit strategies for both a company and investors and it will help you to understand the audit process
Home Equity Loans
Raising capital for your startup can feel daunting but asset based finance, especially in the form of a home equity loan can be a really great way to finance your business. Home equity loans are loans that use the equity that is tied up in your home as security for the loan. The advantages of using a home equity loan to finance your startup are that generally these types of loans are based on a fixed interest rate over a number of years. For budgeting purposes this means that you can factor in the cost of the loan into your budget and it will give you a clear idea of what your turnover and profits need to be to service the loan and debt.
Home equity loans are often offered at a much lower interest rate than other types of finance. You therefore save on the repayments. These loans also tend to be repaid over a longer term which means that monthly payments are generally lower than other loans like auto finance or credit card loans.
The risk involved in using a home equity loan as startup finance is of course that you risk losing your home should you be unable to service the debt. You therefore need to plan carefully and ensure that your startup idea is destined to succeed.
Planning to succeed includes creating budgets, forecasts and financials that will give you an honest view of your start-up. To learn how to create these forecasts and financials, you should consider a course like the Basics of Business Finance course. This course contains over twenty four lectures that will teach you the fundamentals of business and financial analysis. It will help you understand the language of corporate finance. You will learn the basics of accounting, financial statement analysis and how to use Excel to build financials.
If your start-up requires specialized equipment, then chances are you will be approaching financial institutions for this type of finance. An equipment lease allows you to purchase the equipment you need without having to fund the equipment at the start. There are a number of benefits associated with equipment leases:
The costs of leasing the equipment is often tax deductible. Leases over a period of five years allow you to claim the asset as a capital allowance. Monthly payments are generally fixed so you can easily add these payments to your budgets and forecasts. A big advantage to leasing equipment is that generally the company leasing the equipment, also ensure that the equipment is properly serviced and maintained.
The disadvantages of leasing equipment are that the lease can often tie up your company for many years. Leases can be very complicated and rigid and over the long term, the costs of leasing equipment are often far more expensive than buying the equipment outright.
As a startup you need to weigh the pros and cons of different forms of finance as well as things like the time value of money before you decide on a particular type of loan. The Learn basics of Business Finance and little more course, contains over twenty five lectures that will teach you key financial concepts. It will give you the tools and techniques you need to understand finance. It also includes lessons on the time value of money, present value and valuation.
Finance Your Dreams
As an entrepreneur, there will always be new things to learn and new challenges. Financing your startup may feel daunting, but learning about the various financial alternatives can help you fund your startup and follow your dreams.
If you have an idea and are wanting to fund your startup then the Raising Money for Startups course is a great place to start. This course includes ideas on how to raise capital from angel investors and venture capitalists and what you should know before you approach investors. The course includes information on the four critical elements of an attractive startup and it teaches you how to create an effective and enticing pitch for your idea to ensure you secure the finance you need.