Category Archives: Small Business Finances

Financial matters for small business

How to Make the Most of Equity Financing

Basically, there are two ways to fund a new business: debt and equity. Debt, commonly thought of as a loan, requires that the borrower/guarantor has an adequate cash flow or has enough unencumbered liquid assets to pledge as collateral. This collateral covers the debt's principle and any liquidation costs and discounts in the event that the borrower cannot make the agreed [...]

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Should You Rent or Own Your Business Real Estate?

The question, “Is it better to lease office space or own it?” is at the core of many business plan decisions that I review. On the one hand, I never advise owning real estate for startups because they have a high rate of failure. However, it is a decision that should not to be undertaken lightly for more established [...]

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What You Think You Know about Credit Is Just Wrong

There is a huge difference between consumer credit and business credit. Consumer credit funds consumptions while business credit is known as “leverage” and is applied to the purchase of an income producing asset. As individuals, consumer credit is generally a method we use to obtain what we desire sooner than if we were forced to save up the funds to purchase [...]

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Is Bad Debt Destroying Your Business?

Don’t look to our government as a model in understanding good vs. bad debt. Every day the media highlights another case of the government’s ignorance in the way money should be used. One side of the aisle says it is a revenue problem and we need to raise taxes on the rich. The other side says it is an [...]

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The Feeble Role of Government to Stimulate Small Business

The news is filled with quotes from government officials exposing the critical role small business play in our economy. Articles talk about the billions in government dollars directed toward supporting small businesses. However, before you stake your claim on these funds, you should understand the assumptions the government has about small business. Having made several trips to Washington D.C. to advocate [...]

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A Step by Step Guide to Business Financing

Several weeks ago, Sara Pope of ConsumerAffairs.com, reached out to me and asked if I could review a step by step guide to business loans and financing that her company had produced. My initial reaction was to just say no. My inclination to decline her offer was based on my experience with hundreds of nascent entrepreneurs. All too often, my first [...]

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Using Microeconomics to Maximize Revenue

As a small business, you have to consider the concept of microeconomics when pricing your product or service to maximize revenue. By definition, microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources (i.e., money). Contrast microeconomics with macroeconomics. Macroeconomics considers the the sum of all economic activity such as dealing with the [...]

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Selling a Business – What to Expect During Due Diligence

When I sold my first company, I got a call from my business broker just before I was packing up to go home one night. He said that there was some interest in my business by a potential out-of-state buyer. He added they were a publicly traded company and wanted to fly out a team to conduct their [...]

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Allocation of Sales Price Governs Tax Consequences

Once you agree on a final price for the business, the seller and buyer must agree to what portion of the purchase price applies to the tangible assets vs. intangible assets (e.g., goodwill). The allocation of the purchase price will dictate what portion of the sale price the seller can treat as capital gains vs. ordinary income tax. [...]

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Forms of M&A Payments

Most buyers and sellers just assume that when you buy or sell a business you pay cash. While cash may be a component in the sales price, generally a business sale is never an all cash deal. Often, there are secured notes and/or unsecured notes that the seller my extend to the buyer. Of course, a secured note [...]

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