Understanding Management Accounts To Optimize The Sources Of Finance For Small Business

There are really no business financing course which focuses on how to understand accounting when it comes to understanding management accounts. You can of course use academic books but with the information you will get from them, the probability that what you learn from these sources to match your needs as a manager or owner of a small or medium sized business is very low. Would you agree?

So the question is how to get business financing meaning how do business loans work?

Here’s a short list of things to consider

1. Develop a solid, on-going, understanding of both your financial accounts or how to understand accounting.

Remember this, regardless of the business financing model, these elements are vital when it comes to your business financing. This is the reason why understanding management accounts are skills you need to have or if not develop quickly as your financial statements tell the story of your business and most importantly your ability to manage it.

2. Ensure you have a sound personal and business credit.

When you have tried to answer the question of how do business loans work, you will know that you need to have a strong credit file. However beware that your probability of success when applying for a business loan when you are a small and medium sized business is highly correlated with both your personal and business credit histories.

3. Prepare your case, build a strong file

As a business owner, I am sure you are now aware that not only must you ensure your business runs smoothly but also that you can handle discussions and meetings with your banker or accountant when it comes to your business financing.

To do so skilfully and with confidence, first of all, you can answer if anyone asks you how do business loans work as when you are applying for a business loan, you no longer feel paralysed and hopeless. When your understanding of management accounts is under your belt, then you are ready to build a very strong and solid credit file. You now need to focus on assembling the important pieces to make you have everything you need to make it happen. Think of the lender as a customer to better understand what they’re looking for. Then, develop a business proposal that addresses all their potential needs and concerns.

4. Sources of Finance For Small Business: do your research!

Beware when you are researching your sources of finance for small business. What lenders focus on is credit history and net worth. There are a wide variety of financing sources and you might want to take into account different criteria such things like industry, sector, and geography when looking for business financing sources.

5. Choose the Right Lender

The best formula to select the right lender for you when applying for a business loan before making any formal application is to ensure that it has the specific terms and conditions you are looking for in terms of length of the loan, fixed or flexible are and that this lender has a good lending track record.

6. Do NOT rush into the loan application

Like for any important and big decisions, applying for a business loan follows the same principle. DO NOT rush into it, in other words do not jump on the first offer. I understand you might be under incredible time and money pressure but DO take your time before you commit yourself. The time you invest in comparing the different options you have will ultimately save you considerable time and money in the long term and also avoid many headaches.

7. Do NOT Procastinate

Well, it is true that I just said not to rush when it comes to choose the right sources of finance for small business. However that did not mean not to do ANYTHING either. This is a huge difference to make. You want to get things done and even if you have to go through a painful process, this is a must do process to overcome so that you can get what you want: get finances for your business


No matter what your business financing needs are, do not wait. Start investing your time becoming a master at your business financials, develop your skills and knowledge with how to understand accounting so that you will know how do business loans work. You will therefore have the right tools in order to get the financing you need with certainty and a high success. Think how exciting and what a relief it will be the day the money will be wired into your account and you can take your business to the next level.

Business Finances Made Easy’s mission is to help business owners getting an accurate understanding of their business finances. This will allow them to be able to discuss their business finances at any time with confidence and will help them to get additional funding on demand.


Posted in Uncategorized | Comments Off on Understanding Management Accounts To Optimize The Sources Of Finance For Small Business

Finding New Financing From Your Vendors

When most business owners think about vendor financing they think about trade finance meaning that a supplier or vendor allows the business to purchase its products via an informal credit line.

For example, your business purchases $10,000 in goods from a major supplier and based on your business’s long-term relationship with that provider, the supplier or vendor may allow you 20 days to pay for those goods.

This delay allows your business time to convert those goods (purchased from that supplier or vendor) into finished products that can then be sold to customers. Thus, if your business’s customers pay you for the finished product before the 20 day period is up, you can use those funds to pay off the supplier – essentially buying needed materials at zero or little cost to your company.

Businesses and their suppliers have been conducting this type of informal financing for decades. The purchasing business or the one that gets the trade terms benefits because it is allowed a grace period to pay for those material and, on the other hand, the supplier benefits as it keeps its customers (your business) happy and coming back for more.

Recently, however, there has cropped up a new form of financing.

This new form is where a vendor or supplier provides money directly to one of its customers in the form of a business loan and requires the customers to use those funds to purchase the supplier’s or vendor’s products.

Example, Microsoft has recently been providing some of its less than financially strong customers (customers who are either hampered by the tight credit market or just cannot get financing elsewhere) actual money (cash) so that these customers can use those funds to purchase Microsoft’s products. Thus, for businesses needing to add additional software products or upgrade to newer versions, this might just be a simple way of doing so without depleting necessary cash on hand.

Now, even if the business has to pay interest on these funds – making the products purchased that much more expensive – it still benefits them by allow them to get what they need now but only having to pay for it over times (essentially using the goods purchased to pay for the loan).

Vendors also benefit in several ways -ways that your business can use to its advantage:

First, it helps the vendor’s sales volume. Instead of selling good on credit terms and simply increasing accounts receivables, the vendor actually receive hard cash for the sale (even though it is their own money); cash that immediately flows through to the bottom line – great for public companies approaching quarterly earning reports.

Second, it provides the vendor an additional stream of revenue in the form of interest income and fees. Do know that if your business is approved for a vendor loan, there will be interest and fees involved just like traditional business loans and, since most of these borrowers cannot get financing elsewhere, the interest rate and fees may be higher than other business financing options. But, if it is your only option and you still can earn a decent profit from it – them by all means. They are scratching your back and you should repay the favor.

Lastly, when vendors are facing slow demand for their products (especially in recessionary times or lower than average consumer and business confidence) vendors can use this type of arrangement to ensure that it 1) keeps its current customers base (by providing those businesses, who may really be struggling, a means to continue to purchase goods and stay in business until the slow economic period abates) and 2) can attract new customers (either start-up businesses or established players who frequent competitors) by offering them quick and simple financing along with their products and services (the ultimate bundle of products – both the goods and the financing for them).

While there are pit falls to this type of business financing; just like any type of financing, businesses may find that these vendor loans are just the ticket to keep them in the game until the market really beings to recover or feel like it has.

But, with all financing, it is always best for the borrower to consider all options and weigh the pros against the cons. Financially sound management decision will always make the best decision for the business as a whole. But, if your company is seeking a business loan and your bank will still not take your calls, you might just try your vendors – especially if you w

Posted in Uncategorized | Comments Off on Finding New Financing From Your Vendors