Business finance is a lot trickier than personal finance. There are many more factors involved, including additional dependents, or employees, as well as equipment requirements, building maintenance, cash flow and statement control. In order to keep money moving through a business, a number of techniques are practiced, including the following:
For a business' startup or expansion, business loans are very common. Most often, businesses find these loans through a bank. For smaller businesses, the Small Business Administration can help navigate the financial market and help a small business find backing for a loan. Before receiving a business loan, many companies prepare a SWOT analysis, which strategically evaluates the strengths, weaknesses, opportunities and threats involves in a project or business venture. This analysis is commonly presented to the loan officers as a marking of a loan's practicality and security.
Business Credit Cards
Whether just starting or on a roll, businesses have turned to a new option for credit: business credit cards. While straight business loans often have lower interest rates, business credit cards are popular for their high credit lines and "reward" points, which companies can put toward corporate travel and other business expenses. Business credit cards are also convenient for organizing business expenses, as credit card companies will track the business' spending, itemize and categorize it and provide a year-end statement summary of the business' financial patterns. This can help with future debt reduction and financial strategy.
Business Line of Credit
For established companies without a specific budget plan, business lines of credit can be extremely convenient. They allow businesses to only borrow what they need when they need it, and the funds are available immediately. Interest payments are generally low, most companies do not charge an annual fee, and the credit lines can range anywhere from $25,000 to $2 million, depending on the company that offers the credit line. To qualify for a business line of credit, most institutions require some evidence of business stability, such as revenue streams and years in business. The line of credit strategy works very well as a revolving credit option, where business can take some and pay some back as time permits or requires.
Depending on a business' necessary equipment -- often varying based on industry and company size -- equipment financing can be a helpful tool when building a business. Rather than paying for equipment like desks, computers, phones and transportation, businesses can finance these items, often with reasonable interest rates and payment options. Depending on the financing corporation, businesses can finance anywhere from $20,000 to $10 million in equipment. However, most financers require an application and credit check, so not all business will qualify for bigger equipment financing plans. In addition, the size of a company's down payment will likely determine the amount they are able to finance.
In order to receive money owed more quickly, some business creditors sell these accounts receivable (invoices) to third parties and a discount. Unlike bank loans, which are determined on the credit worthiness of the seller or business, invoice factoring focuses on the credit worthiness of the debtor, the person who owes the money to the seller and will then forward their payments to the factors, or people who buy the accounts receivable. Invoice factoring is a contractual concept often exhibited in debt management plans, where debt management companies become the factors, purchasing discounted credits from the creditors in order to reduce their client's (the debtor's) payments.
Business Debt Consolidation
Depending on a business' size, business debt consolidation can help solve financial problems within a company. Big businesses, typically defined as those netting over $5 million per year, are more likely to find low-interest secured consolidation loans, because they have more property to put down as collateral. Small businesses, on the other hand, have more trouble doing so.