Investigating the Sources of Finance
I'm now going to investigate the sources of finance available to you
when setting up your new business. I will separate the sources of
finance needed into three categories; start-up costs, running costs
and expansion costs.
When starting up your new business premises will need to be secured
from which you will trade. I'm going to look at ways that you could
secure premises. The first option available to you is a mortgage;
these are long-term loans offered by banks or building societies based
on property as collateral. Interest must be paid on the mortgage, but
this will cover the original sum and when the money has been paid
back, you become the owner of the property. Alternatively you could
choose the option of renting; this is when a weekly or monthly sum is
paid to the landlord for the service of being able to trade from the
property. Renting will probably be cheaper as no interest has to be
paid. Another advantage is if you moved premises or ceased trading and
had a mortgage, the mortgage lender would gain ownership of the
premises, whereas if you rented you would only have to stop paying
rent. My recommendation is to rent premises for the first 2-3 years,
if your business is successful and you plan to stay where you are then
apply for a mortgage. There is less risk this way, as if you had a
mortgage and your business was unsuccessful and you ceased trading,
your premises would be lost and then gained by the mortgage lender.
However, if you choose the option of renting this would then become a
running cost.
As well as premises your business will also need to purchase machinery
and e...
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...uture I would advise you to take up
the third option of renting or purchasing an additional site. My
reasons for this are; there is no hassle of possibly closing down your
business whilst building work takes place on your existing site. You
will also have sites in two areas, making you able to establish
yourself in the new area, as well as further establish yourself in the
existing area, thus creating more revenue and profit. Finally there
isn't as much risk as moving to a new larger site, because if your
business fails in the new site everything is lost, whereas if you rent
or purchase an additional site only your start-up costs will be lost
if the business fails. And you will still have your old site.
I hope that you will find the information provided helpful when
selecting sources of finance for your new business.
And for those who are qualified, this can be easily done by using a piggy-back mortgage. What is a piggy-back mortgage you ask? Well, a piggy-back mortgage, also known as a second mortgage, is a loan that 's taken out by a borrower at the same time as he takes out the first mortgage. These types of loans are typically used to lower the loan-to-value ratio (LTV) of a home, which will help a borrower qualify more easily and to eliminate the need for paying PMI. Not having to pay PMI premiums could ultimately save a borrower thousands of dollars on his mortgage. However, you will need to keep in mind that a second mortgage is usually charged a higher interest rate than your first mortgage. Therefore, you should make sure you are able to pay it off as quickly as possible. If you can 't, then you might be better off paying the PMI premiums, because if you can 't pay off your piggy-back loan quickly, it would probably be more cost effective to just go ahead and pay the PMI and drop it once you have reached 20 percent equity in your home. You also need to be careful with piggy-back loans because they can be a bit tricky. Quite often the terms of second mortgage include adjustable rates and they might also have a balloon provision included with them as
If you apply for a personal loan with your current bank, then you will probably get it. They may not offer you very much
Leasing may also be a better option if you don’t have very much cash saved for a down payment. Usually a leaser requires a “drive off” o...
If you are in the market to purchase a home, see if you meet the FHA loan requirements. The benefits of having the FHA back your mortgage is absolutely priceless. Contact any of AMCAP Mortgage FHA loan specialists to discuss FHA qualifications and requirements.
Your budget should not be limited to buying a house alone, it should include a large margin for such additional costs.
· I would have to pay out of my own money in order to start my
do menial tasks to be able to buy some food and then somehow pay off
banks such as Credit One, or First Premiere bank with interest rates of 50% and up.
What do you understand by the phrase “stakeholder analysis”? Attempt a stakeholder analysis of an organisation that you are closely associated with.
decided to start up a shop would need finance at first to just buy the
Buying a home is more complex then most think. A purchaser of a home doesn't pay in cash when buying a house. If that were so, then nobody would be able to afford one. A potential buyer must get a loan. The bank doesn't lend their money to just anybody, so there are prerequisites before a buyer should consider buying a home. The potential buyer must have enough money for a down payment which is 3% to 20% of purchase price, a steady job with for at least two years or more, must have a decent credit score with at least a 640 or better. That is standard for the market. (1) The credit score is based on the FICO score. FICO stands for, Fair Isaac Corporation, a company that has been in business since the early 1950's and monitors consumers' credit ratings and put a scoring system on it. (2) Conventional loans are usually financed up to eighty to ninety percent with a down payment required of ten to twenty percent. The potential buyer must also have a debt ratio not exceeding 28/39 of their income. The first number 28 refers to your new mortgage payment that cannot exceed 28% for your gross combined income and 39 refers to your mortgage payment plus revolving and installment debt as well as taxes and insurance cannot exceed 39% of you total combined gross income (3).
The financial manager is responsible for giving financial advice and support to clients and colleagues that will enable them to make good business decisions. Particular work environments differ considerable and involve both public and private sector organizations such as retailers, corporations, financial institutions, charities, and even small manufacturing companies and schools (Financial Manager, 2011).
Research on the Sources of Finance for a Business Firms sometimes need to raise finance for Working Capital and Capital Expenditure. Explain what each is and give examples. · Working Capital (or Revenue Expenditure) The working capital is made up of the current assets net of the current liabilities. It is vital to a business to have sufficient working capital to meet all its requirements. Many businesses have gone under, not because they were unprofitable, but because they suffered from shortages of working capital.
Sources of finance are the different methods for a business to earn and obtain money. There are lots of ways to obtain money but two large basic sources of finance, which are the “owner’s capital” and “capital borrowed”. They are also called internal sources of finance and external sources of finance. In those sources, they are mainly divided in two groups, which are short-term sources of finance and long-term sources of finance.
Never have I ever climbed a mountain peak. As a child, I imagined myself conducting expeditions in deep-frozen pathways, leading amateur explorers to the top of the world, and instructing rookies in surviving harsh blizzards. Even though slightly altered, my childhood dream has been achieved. I led a team of fellow classmates, in my Strategic Management course, to the success summit of a financial competition. Over the course of a semester, I and my teammates were supposed to create and manage a company of the IT industry, in a computer-simulated environment, along with other four rival teams. I dealt with strategy and financial matters of our virtual enterprise, while my colleagues were working on marketing and manufacturing. During the four months of the exercise, I have experienced finance from various aspects: capital budgeting, through selecting favorable investment for upcoming quarters; debt management, by assessing the necessary amount and efficiency of loans; profitability analysis and dividend policy, which had been used to compile the company’s general performance index. Working in a multinational team, which included an American, a Norwegian and a Moldovan, strengthen my negotiations skills, as well as flexibility and cooperation. But above all, this experience intensified my passion for finance. Of course, a pleasant bonus was the fact that, in the end, our company’s financial performance was six times the performance of second-best team.