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Sunday, November 4, 2012

Sources of Finance For Anyone Thinking of starting a small Business

My Name is Andrew Gere and this is a small booklet I have put together to help young entrepreneurs looking to start up their own small business.
Often the hardest part of starting a business is raising the money to get going. The entrepreneur might have a great idea and clear idea of how to turn it into a successful business.  However, if sufficient finance can’t be raised, it is unlikely that the business will get off the ground.
Raising finance for start-up requires careful planning.  The entrepreneur needs to decide:
·         How much finance is required?
·         When and how long the finance is needed for?
·         What security (if any) can be provided?
·         Whether the entrepreneur is prepared to give up some control (ownership) of the start-up in return for investment?

Definition
A finance source, or financing method, helps an organization meet short-term operating needs, such as paying for costs of materials, salaries and other administrative expenses.
Financing is a significant business practice in modern economies. A firm with no access to financial markets or unable to raise funds privately may have difficulties operating. Senior leaders may be unable to set long-term goals without funding.
There are two major types of sources of finance they are Equity and debt financing products.
Small businesses can get money through "equity financing" or "debt financing." Equity financing means that you sell stock in your company to a buyer, who then has an ownership interest in your company. Debt financing means a loan -- you owe the person who holds the debt (usually a promissory note) the amount borrowed.
Equity products include shares of common stock and preferred stock. Debt products include bonds, private loans and overdraft agreements.
Equity Financing
Equity financing also known as “share capital” is the act of raising money for company activities by selling common or preferred stock to individual or institutional investors. In return for the money paid, shareholders receive ownership interests in the corporation.
Equity financing helps top leadership raise funds by selling shares of equity, or stocks, on securities exchanges. A shareholder, also called stockholder, receives regular dividend payments and makes profits when share prices rise.

Debt financing
When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.
Internal sources of finance are funds found inside the business. For example, profits can be kept back to finance expansion. Alternatively the business can sell assets (items it owns) that are no longer really needed to free up cash. This approach to financing business activities is only possible when the business's principals have sufficient funds at their disposal to allocate some for their company's use.
Traditionally, the major sources of finance for a limited company were internal sources:
·         Personal savings
·         Retained profit
·         Working capital
·         Sale of fixed assets

Personal savings
Quite simply, personal savings are amounts of money that a business person, partner or shareholder has at their disposal to do with as they wish. If that person uses their savings to invest in their own or another business, then the source of finance comes under the heading of personal savings.

Although we would generally discuss personal savings as a source of finance for small businesses, there are many examples where business people have used substantial sums of their own money to help to finance their businesses. A good and very public example here is Jamie Oliver, the television chef. Jamie financed his new restaurant, 'Fifteen', using fifteen raw recruits to the catering trade and a large amount (£500,000) of his own cash.

Retained profit
Simply put this is money re-invested back into the business, usually to improve or expand it

When a business makes a profit and it does not spend it, it keeps it - and accountants call profits that are kept and not spent retained profits.

The retained profit is then available to use within the business to help with buying new machinery, vehicles, and computers and so on or developing the business in any other way. Retained profits are also kept if the owners think that they may have difficulties in the future so they save them for a rainy day!

Working Capital
Working Capital

This is the short-term capital or finance that a business keeps. Working capital is the money used to pay for the everyday trading activities carried out by the business - stationery needs, staff salaries and wages, rent, energy bills, payments for supplies and so on. Working capital is defined as:

Working capital = current assets - current liabilities

Where:

Current assets are short term sources of finance such as stocks, debtors and cash - the amount of cash and cash equivalents - the business has at any one time. Cash is cash in hand and deposits payable on demand (e.g. current accounts). Cash equivalents are short term and highly liquid investments which are easily and immediately convertible into cash.
Current liabilities are short term requirements for cash including trade creditors, expense creditors, tax owing, dividends owing - the amount of money the business owes to other people/groups/businesses at any one time that needs to be repaid within the next month or so.

Sale of fixed assets
This is selling of what is no longer required (turn the asset back into cash).
A fixed asset is anything that is not used up in the production of the good or service concerned - land, buildings, fixtures and fittings, machinery, vehicles and so on. At times, one or more of these fixed assets may be surplus to requirements and can be sold.

Alternatively, a business may desperately need to find some cash so it decides to stop offering certain products or services and because of that can sell some of its fixed assets. Hence, by selling fixed assets, business can use them as a source of finance. Selling its fixed assets, therefore, has an effect on the potential capacity of the business - the amount it can produce.
You contributing your own money to your business is the easiest way to finance it.
Some of the pros of internal sources of finance include;
·         Decision-Making Freedom
When you finance your business activities internally, you are not accountable to any outside entity. You don't need to explain your business decisions to anyone outside your company or seek their approval before making changes or expanding. This decision-making freedom enables you to weigh personal as well as financial considerations when choosing the right course of action for your business.
·         Flexibility
Internal financing allows you considerably more flexibility to pay back than outside sources of capital. If you finance your business internally and you experience a slow period that makes it difficult for you to repay a loan according to the schedule you have outlined, you can simply make an extra payment the next month. With internal financing it is usually easy to adjust payment terms in accordance with your current business cash flow and other unanticipated circumstances.
·         Credit Score Consequences
If you finance your business internally and have difficulty making your payments, this will not affect your credit score because you will not report yourself to the major credit agency if things do not go as planned.
As easy as it seems to fund your small business through sources of internal finance it has some important drawbacks
Capital Needs
The chief concern with internal financing is that when you take money from your operating budget or capital, it leaves you with less money to manage daily expenses. In this way, using internal sources of financing for company endeavours can compete with budgets already in place. For this reason, internal investment is usually used to finance small projects and investments, where the costs are small, the payback quick, and the estimated returns significant.
Discipline
Moreover, internal financing is so easy that it leads to a lack of discipline. The company risks becoming inefficient or even complacent unless it strictly monitors the project's investment, budget and any increase in earnings that stems from the project. These actions would normally be required if the company took on debt, such as a loan, or used external financing like issuing stock.
Loss of assets
If you throw all your personal savings into a business venture, you could lose it all. Some assets, such as retirement accounts, are safe from creditors and bankruptcy courts; placing such assets at risk may not be good for you, especially if you're approaching retirement age and are running out of time to rebuild depleted accounts.


Start-ups and small firms are considered very high risk and find it difficult to raise external finance.
External sources of finance are found outside the business, e.g. from creditors or banks.
Short-term sources of external finance
Sources of external finance to cover the short term include:
An overdraft facility, where a bank allows a firm to take out more money than it has in its bank account.
Trade credits, where suppliers deliver goods now and are willing to wait for a number of days before payment.
Factoring, where firms sell their invoices to a factor such as a bank. They do this for some cash right away, rather than waiting 28 days to be paid the full amount.
Long-term sources of external finance
Sources of external finance to cover the long term include:
Owners who invest money in the business. For sole traders and partners this can be their savings. For companies, the funding invested by shareholders is called share capital.
Loans from a bank or from family and friends.
Debentures are loans made to a company.
A mortgage, which is a special type of loan for buying property where monthly payments are spread over a number of years.
Hire purchase or leasing, where monthly payments are made for use of equipment such as a car. Leased equipment is rented and not owned by the firm. Hired equipment is owned by the firm after the final payment.
Grants from charities or the government to help businesses get started, especially in areas of high unemployment.
External sources of finance have a number of big advantages over the internal financing options.
Faster Growth
A business needs investments to grow. Even the most profitable companies cannot rely solely on reinvested profits to finance their expansion. Accordingly, a business needs to secure bank credit, partner with venture capital firms or in any other way tap external sources of finance. External finance provides the room for faster growth, allowing the company to operate on a far bigger scale, capturing new markets and providing products and services to an ever greater number of customers.
Greater Economies of Scale
Large businesses are generally more efficient than small ones. They have a greater bargaining power with suppliers and they can spread their fixed costs, such as administrative expenses, over larger sales. This results in lower costs per unit of production, which, in turn, gives the company a competitive edge in the marketplace. External sources of finance help a company grow faster, achieving the economies of scale necessary to compete with the rival firms on regional, national, or even international level.
Preserving Your Resources
One of the advantages of external funding is it allows you to use internal financial resources for other purposes. If you can find an investment that has a higher interest rate than the bank loan your company just secured, it makes sense to preserve your own resources and put your money into that investment, using the external financing for business operations. You can also set aside your internal financial resources for cash payments to vendors, which can help improve your company's credit rating.
Working capital is important, but a business should carefully consider the disadvantages of external financing before it is undertaken.
Profit share
If the business is making profits, a percentage of its profit has to be distributed to shareholders and other firms where it has gotten finance from.
Loss of ownership
Some sources of external financing, such as investors and shareholders, require you to give up a portion of the ownership in your company in exchange for the funding. You may get that large influx of cash you need to launch your new product, but part of the financing agreement is the investor is allowed to vote on company decisions. This can compromise the vision you originally had for your company when you founded it.
Interest
The cost of external financing is a major factor.
External funding sources require a return on their investment. Banks will add interest to a business loan, and investors will ask for a rate of return in the investment agreement. Interest adds to the overall cost of the investment and can make your external funding more of a financial burden than you had originally planned.
Whether you're starting a new business from scratch or operating a successful business already, securing financing first requires you to think about the best method to go about it.
The choice of a source of finance depends on the following factors
·         Funding availability: The first thing to do when choosing a method of financing your business is to determine what your ranges of options are.
·         Personal savings: When drawing on personal savings for investment in a business, decide how much you can risk without adversely affecting your personal circumstances.
·         Banks: The factor to consider here is whether you are willing to do the necessary work before you go ask for a loan.
·         Cash needs: before thinking of getting loans you should have a good knowledge of how much you need

I hope you find this booklet useful!

Thursday, June 21, 2012

ITSMAGIC

1. Cannot get Excel to load the spreadsheet developed at home over the weekend. Urgent as need to prepare report for company auditors. - The problem is that the excel that you have at home is a different version (via older) that you have at work, therefore this document is set at a different format there fore the document can not load. A way to get around this is you will have to upgrade the version of excel that you have at home to the one or better than the one you have at work in order to get the document to load.

2. Cannot log into system - There could be a wide range of problems regarding this which include, the users username or password is wrong (be careful as these systems are usually caps lock sensitive), the network cable may not be plugged in there fore try and see if your connected to the network, or your workstation isn’t connected to the network in order for you to log in, if this is the case then your workstation needs to be connected to the network.

3. Cannot make orders print off - The user may not be sending the document to the right printer, if this is the case the user needs to find out the name of that printer and assign the document to that printer. The printer may not be turned on for the document to be printed off there fore turn it on. There may not be any paper inside the printer for the document to be printed there fore the user needs to enter in some paper.

4. Cannot access orders list from new machine installed last week, cannot even find database package. - The problem with this is the database package hasn’t been installed onto that machine, a way to get around this is to install that database system and then the document can be viewed by the user.

5.Same problem as yesterday. - Likely problem is your machine hasn’t been connected to the network, in order for you to overcome this problem your machine needs to be connected to the network so you can access the network files.

6. Mouse keeps jumping then screen locks out, trying to print out college assignment finished at home last night, screen displays message ‘Gotcha’. - The problem with this machine is you have been hacked into therefore shut down the machine by turning it off manually and then contact your technical support unit for them to install or upgrade your firewall system so this doesn’t happen again.

7. Got new piece of design software that needs installing on machine and making compatible with printer. - A way to solve this is to install the design software onto your machine and find a printer driver that can link the software and your hardware in order for documents to be printed off.

8. Went to check orders list and screen went ‘pop’ with a nasty smell - Your monitor has just burst and can not be used again, un plug the monitor and dispose off it under the right measurements of disposing electric components.

9. Need access to documents stored on Fredya’s machine but her machine won’t get past boot up stage. - A way to get around this is to either boot it up on a different machine, or to re install the OS.

Saturday, January 7, 2012

  1. Click the start and then choose the control panel option




 
 2.Control panel window opens up. click Display


3. Choose one of the following: 
Smaller-100%. This keeps text and other items at normal size.


Medium-125%. This sets text and other items to 125% of normal size.


Larger-150% This sets text and other items to 150% of normal size. this option appears only if
your monitor supports a resolution of at least 1200 x 900 pixels.