If you are a professional or an entrepreneur you already understand the importance of financial statements. The truth is that being an entrepreneur means you need to keep track of your finances. There is only so much money that you can lend, buy or spend. It’s impossible to overstate the significance and importance of properly monitoring your personal financial data throughout the year. You need to make sure your personal and business finances are in fine shape.
The best finance education for entrepreneurs starts with a solid fundamental understanding of finance. Many aspiring entrepreneurs struggle because they do not understand how finance works. They also have no idea how venture capitalists, banks, and investment professionals work together. By learning to work with these key decision makers one learns the fundamentals of making informed finance decisions. This includes understanding how banks make loans, how venture capital funds managers decide which projects to fund, and how an entrepreneur decides where to find capital funding. Venture capitalists typically finance most of a company’s capital needs.
Managing your own finances is absolutely essential to the success of your start-up. If you want to manage venture capital or finance yourself, there are several things you should consider first. Most importantly, you must understand that venture capitalists typically fund the companies that have the best management teams, the biggest business ideas, and the strongest sales pitches. Therefore, if you cannot attract these key people and you cannot develop a viable business plan, it is unlikely that you will receive any venture financing.
Most venture capitalists require you to submit a prospectus to them before they will consider financing you. Your prospectus should include your business objectives, business strategy, financial forecasts, and regulatory information. To be effective, it must clearly communicate to a potential financier how you intend to use the funds you raise, how you intend to market your products and services, and how you intend to make your repayments. This information should be specific enough to convince a financier that you are likely to obtain a generous loan.
Start by building a strong financial planning and management team. You will need a qualified accountant and attorney to help you with your business plan, financial forecasting, and ongoing cash flow analysis. In addition, you will need to select an experienced finance consultant with an impressive track record of successfully raising capital. Finance experts can provide invaluable advice about various methods for raising venture finance, such as IPOs, offerings, and M&A.
Business finance companies can also offer factoring, merchant cash advances, and commercial lines of credit. Factoring is a financial solution that allows a business owner to finance expenses that normally would not be financially feasible without outside financing. In factoring is usually offered to businesses that have credit card processing capabilities, because credit card processing accounts generally carry low interest rates.
Venture capitalists invest in businesses with high potential for profit and are usually very impressed by small business plans. To obtain venture finance, a venture capitalist will require an accurate projection of the current value of the business’s tangible assets. Because venture capitalists typically make their investments with limited partners, it is very important that the company has the ability to generate strong cash flow. A highly profitable business that does not have a sound revenue model could easily fail to meet its financial obligations to venture capitalists.
Financing is essential to small businesses growing from a startup to mid-sized or larger size. Small business finance companies can help finance a wide range of common business expenses such as rent, equipment, marketing and advertising programs, payroll, and payment processing solutions. They can also provide long-term funding for start-ups that require significant equity to support day-to-day operations. For more information on small business finance consult a finance expert today.