Finding a Source of Finance for Used Book Store

Finding a Source of Finance for Used Book Store

Length: 1376 words (3.9 double-spaced pages)

Rating: Excellent

Open Document

Essay Preview

More ↓
Finding a Source of Finance for Used Book Store
The partners of the Used Book store are looking into other logical sources of funding for their business. Currently they are receiving funding from a rich relative. For independence, longevity, and success, they feel they need to research other avenues of funding. There are several different types of funding available to them, but they must decide which source would best suit their needs, whether it is remaining with the rich relative or some other source.
Trade credit (open-book credit), credit cards, and SBA guaranteed loans are all types of funding available for small businesses (Ebert & Griffin, 2005). They will need to compare other sources of funding with the benefits and risks involved with remaining with the rich relative.
Trade Credit
Trade credit is the credit extended to businesses by suppliers who let them buy now and pay later. The advantage of trade credit is the ability to take delivery of materials, equipment or other valuables without paying cash on the spot. The practice of trade credit can also help to establish a good working environment between suppliers and the business.
Most suppliers unfortunately will not offer trade credit to a new business that they have not established a working relationship. They will demand payment by cash or check on delivery, or payment by credit card in advance until the business has established that they can pay their bills on time (Entrepreneur, 2008, ¶ 2).
Credit Cards
Credit cards are a convenient and easy way to pay for supplies, material and equipment necessary to start a business. There are several banks that offer business credit cards with different benefits such as reward points, no annual fee, low introductory annual percentage rates, and cash back rewards on purchases (Bankrate, Inc, 2008).
Credit cards may be too convenient to some business owners who do not manage their

finances well. “Many business owners borrow heavily on their credit card only to find

themselves up to their ears in debt. Credit cards are one of the most expensive sources of cash

and have paved the road to bankruptcy court more than once” (Pinson, 2006, p. 143).
What really makes credit cards attractive is that they are not hard to acquire. The two main things that credit card companies look at when issuing credit is personal credit score and established credit of the business owner or owners (Wade, 2006).
SBA Guaranteed Loans

How to Cite this Page

MLA Citation:
"Finding a Source of Finance for Used Book Store." 123HelpMe.com. 18 Jun 2019
    <https://www.123helpme.com/view.asp?id=166451>.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Digital Vs Traditional : Reading The Paperback Magic Treehouse Book

- Digital vs Traditional Remember being in first grade and reading the paperback Magic Treehouse book series where once you open the book and start reading the cover would never stay flat again, then in high school and college you were asked to analyze the books and you only had a small area to write your annotations on. Well what if I told you there was this form of technology called ebooks, otherwise known as digital versions of books and media that could change all that for the better. These e-books can be more beneficial to learning than traditional books, while also making reading more convenient and fun to do....   [tags: E-book, Book, Education, Digital media]

Research Papers
1289 words (3.7 pages)

How Technology Affects Our Education Essay

- How Technology affects our Education Is technology changing the way we think and the way we learn. The internet is a powerful source that has taken over our current generation. The way we do things is changing every day and technology is advancing faster than ever. We don’t think like we used to because we have no reason to anymore, with the internet we have many ways to get by things without having to try hard or to memorize anything. The internet highly affects our brains and the power of education....   [tags: Mobile phone, Internet, Want, Source]

Research Papers
1194 words (3.4 pages)

Essay about Ebooks Vs. Print Books

- Ebooks vs Print Getting educated is one of the most important things in life when it comes to getting a good future. By developing good knowledge of schooling, it helps establish and maintain new information as needed throughout the real world. As books are one the essential tools in learning, eBooks are being used in a everyday lifestyle. Traveling to get away places from city life, helps give reading a comforting feel. Students that use print books are eventually going to use ebooks in the future....   [tags: Book, E-book, Printing, Paper]

Research Papers
1074 words (3.1 pages)

Evangelism Beliefs According to Romans Essay

- The Romans Road to Salvation is a systematic way of explaining the gospel to an unbeliever by referencing a series of Bible verses in the Book of Romans. First, explain the human need: “For all have sinned and fall short of the glory of God” (New International Version, Romans 3:23). Second, speak to sin’s penalty: “For the wages of sin is death, but the gift of God is eternal life in Christ Jesus our Lord” (6:23). Next talk about God’s provision for this penalty: “But God demonstrates his own love for us in this: While we were still sinners, Christ died for us” (5:8)....   [tags: evangelistics, salvations, romans book]

Research Papers
1161 words (3.3 pages)

Nickel and Dimed: On (not) Getting by in America Essay

- Barbara Ehrenreich's, "Nickel and Dimed: On (Not) Getting By in America", is a book that strives to change the way America perceives its working poor. Incorporated is a journal of the time spent by the author, with her identity and Ph.D concealed, working in order to discover whether she could support a basic life style from earning minimum wage. This book brings to light general problems such as stress in the work place, lack of proper benefits, and how what was merely an experiment for Ehrenreich, is a real detriment for many others....   [tags: Book Reviews]

Research Papers
1300 words (3.7 pages)

Barnes & Noble: The Book Store Chain Essay

- The bookstore chain has been decreasing in profit in the US over the past 20 years. Most of the books retailers are shutting down their operations and only a few are still operating in the country. Barnes and Noble has become the largest bookseller in the book retailers industry. The firm has integrated its business philosophy into web presence though eBook marketplace. This business strategy assisted the firm to be able to reach a large scale customers and remain as a strongest competitor in the book retailing market....   [tags: nook tablets, ebook, digital book]

Research Papers
999 words (2.9 pages)

Essay on I Can Breathe A Big Sigh Of Relief

- August has been a month of research and planning for fall and beyond. As a result, my participation with the building project has taken a back seat to other projects and tasks this month. I can breathe a big sigh of relief as ARIS (the MBLC’s required Annual Report Information Survey) was completed, submitted and accepted this month. ARIS takes a bit of time from all Department Heads to gather and synthesize required information. Inevitably, the questions are slightly changed from year to year and it takes time to sort out exactly what items count in each category....   [tags: Apple Inc., IPhone, IPhone OS, App Store]

Research Papers
728 words (2.1 pages)

Essay on Primary Source Evaluation

- Title of Primary Source: ACCOUNT OF THE SLAVE TRADE ON THE COAST OF AFRICA by ALEXANDER FALCONBRIDGE The book was published in 1788 -- substantially after the events described took place. The time gap did not seriously affect the main content of the material because the events he describes were very serious and unforgettable ones. He wrote the material at the time he had already been a member of the Anti- Slavery Society leaving room for a little suspicion of his tendency to exaggerate some descriptions in his narrative....   [tags: Source Evaluation]

Research Papers
1014 words (2.9 pages)

Fantasy in the Book Store Essay

- "Can I help you kids with anything?" Comes a dry voice from behind them. Xander jumps a little, half startled out of his skin and drops the dusty old fairytale book he was holding. Luna pivots around until she comes face to face with a short old woman whose wrinkled face seemed to be moulded into a permanent scowl. "We were just looking” Xander winces nervously, as he hurried to flatten out a page of the book he dropped. The old woman just stares at them and rolls her eyes "You'll never get a crease out like that," she mutters, snatching the book out of 's hands....   [tags: personal narrative]

Research Papers
2631 words (7.5 pages)

Essay about Application For Open Source Software

- Open source software is software that is available for adaption and improvement by anyone. Open source software is distributed with an open source license. An open source license is a license that allows for the software to be freely used and shared. This is done by making the source code available for modification. Open source development can greatly change the approach required when considering process models. Making the source code available and allowing for open source developing relinquishes a certain amount of control over the direction of the project....   [tags: Open source, Free software, Source code]

Research Papers
792 words (2.3 pages)

The Small Business Administration guaranteed loan program is usually a secondary source of financing. A business may seek a SBA guaranteed loan after being denied a loan from conventional lenders. The SBA offers a variety of loan programs, depending on the amount of guaranty determines the amount of hassle. In other words, the higher the guaranty, the more paperwork, and longer the delay. Most of the SBA’s business loans are made by private lenders and then guaranteed by the agency (Pinson, 2006, p. 137).
The benefits of a SBA guaranteed loan are a longer maturity at better repayment terms and interest rates, thereby reducing monthly payments and the initial loan burden (Pinson, 2006).
One of the risks of a SBA guaranteed loan is the application itself. The key requirements for some SBA loan programs are: the business must have been turned down by a bank or other lender to qualify for most SBA Business loan programs, required to submit a guaranty (personal and business), must operate for profit; be engaged in, or propose to do business in, the United States or its possessions; have reasonable owner equity to invest; and use alternative financial resources first including personal assets, must meet eligibility criteria including size, type of business; operating in the United States or its possessions, use of available funds from other sources, use of proceeds; and repayment (D & B, 2008).
The repayment term of an SBA guaranteed loan is between five and twenty five years depending on the lift of the assets being financed and the cash needs of the business. Working capital loans repayment is usually five to ten years. Some SBA short-term loan programs have shorter repayment terms (D & B, 2008).
Relatives
Funding which comes from relatives or even friends needs to be approached with caution. Before asking a relative for funding a business plan must be in place which will outline the businesses motives and plans. The partners need to make sure that if they continue to accept financing from the rich relative that the business plan is understood and they understand the relative’s motives for investing in the Used Book store (Startup Nation, 2008, ¶ 7).
A loan agreement should be drawn up to protect both parties and ensure that everyone understands this is business, not personal. Some things that should be included in the loan agreement are: term of the loan, payment amount, payment schedule, interest rate, how/when the loan will be paid if the business fails how to handle late or missed payments, and any special arrangements, such as no payments for the first year, interest-only payments, seasonal payments, etc. (Startup Nation, 2008).
Comparison
The most important things the partners need to consider in deciding which type of funding will best suit their needs is how much that funding will cost them. Of the types researched, credit cards are the most costly. The interest rates vary from 9-25%, along with late fees, penalties, and potential bad credit ratings if payments are not made (Bankrate, Inc, 2008). The convenience of them and ease with which they can be acquired make them attractive, but the bottom line on having a credit card is to keep balances low and payments high (Wade, 2006).
Trade credit is a very good idea and should be looked into after the business is established. Suppliers are more willing to grant credit and set up payment arrangements after they have seen proof that the business can pay their bills on time. Some suppliers may be willing to work with business during start up if presented with a properly prepared financial plan (Entrepreneur, 2008, ¶ 2). The benefit of establishing trade credit at the startup of the business is being able to keep cash on hand for operating costs such as employee’s wages, utilities, and payroll taxes. One way to improve cash flow for the first two weeks of any month is to hold on to payroll taxes until the middle of the month, but being sure to pay at the last minute to prevent paying penalties (Paulson, 2000, p. 220). One of the risks of trade credit, if granted, is the cost. Depending on the terms agreed upon, the cost can be quite high. Going over the agreement terms and having a good understanding of the implications late payments can have is a key factor in setting up the terms for trade credit (Entrepreneur, ¶ 6).
SBA guaranteed loans are not as expensive as credit cards and trade credit, but they require early planning and a lot of research to finding the one best suited for the business. Waiting until the last minute is not an option when applying for a SBA loan. Most SBA loan programs require that the business been turned down by a bank or other lending institution, but not all of them (U. S. Small Business Administration, 2008). The risk of a SBA guaranteed loans are the requirements and the timing.
Funding supplied by relatives is the cheapest funding in relation to money, but the cost can be high in terms of personal relations if the repayment schedule is not timely or the business fails (Pinson, 2006, p. 137). Good planning and making sure a loan agreement is reached is important to making this type of funding workable for the business.
Conclusion
The partners have agreed that continuing financing from the rich relative is the best approach for getting the Used Book store off the ground. But as mentioned before, the partners must be sure of the relative’s motives, to approach it as a loan and not an investment, to focus on a repayment schedule, and draft an official loan agreement (Startup Nation, 2008, ¶ 6).
The partners are starting their business with $30,000 on hand and with the financing from the rich relative, feel that applying for a SBA guaranteed loan will be their next step for financing the Used Book store in the future if it becomes necessary. This decision is based upon the amount of money these sources will cost (Pinson, 2006, p. 143).
Return to 123HelpMe.com