Building a company in a tough credit environment is not an easy task. And many companies run into financial problems not necessarily because they lack opportunity – but rather because they lack business credit.

Obtaining any form of business financing during troubled times, especially a business loan is very difficult. During hard times, most institutions tend to tighten their credit standards making business loans inaccessible to all but the most credit worthy businesses. And in part, that is how many medium and smaller sized businesses run into trouble. Without easy access to financing, they become vulnerable.

There are some forms of business financing that are available to businesses – even businesses that have problems. For example, let’s examine a recurring situation in commercial transactions. Commonly, companies extend business credit to their clients and wait around 45 days after the sales to get paid for their products/services. By doing this, you are providing your client with a short term loan. Unfortunately, you don’t have an alternative. Most clients demand payment terms as a cost of doing business with them. This is a problem because few companies can afford to wait 45 days to get paid on their invoices.

There is a solution to this issue, which may work better that a business loan. It’s called invoice factoring. A factoring arrangement provides you with an advance, secured by your invoice. Basically you get about 80% of its face value as a first installment, which enables provides liquidity to cover business expenses. The remainder 20%, less a service fee, is given to your company as soon as the invoice is paid for.

Most companies use factoring to cover cash flow shortfalls, at least initially. However, factoring’s potential comes from how it can help your firm grow. It’s a simple proposition. If you had clients that could pay their invoices in two days, how many would you take? Most owners would take as many as they can get. And that – quick payments – is what factoring financing really delivers.

The cost of invoice factoring varies based on how much funding you need, for how long, and the payment quality of your clients. Generally speaking fees can range from 1.5% to 3.5% for 30 days, but they vary broadly based on many parameters.

Factoring does not work for everyone though – it only works for commercial sales. Specifically, it works for companies that sell on terms to other businesses and who can’t afford to wait to get paid.

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Seller financing

A seller that is willing to accept terms will usually have a different price for a financed deal versus cash only deal. If the buyer is asking for terms, then their negotiating position is weaker than if they were paying the cash out price in full. It does not matter to the seller if some of this money is from a loan from another source.

If terms, using the seller, are the only way the deal can be floated, then this will take some serious discussion as to length of time and the amount of the loan. The balance will come from money the buyer has access to. The purchase price of a seller-financed purchase can carry a premium of 40 to 60% more than the cash price. It is obviously in the buyer’s interest to get the money elsewhere so that the cash only price can be met.

This large variance in price makes for spirited negotiating and leaves a great deal of room to come up with a deal. This is where a third party like a business broker is very useful as they have been through this stage of a sale many times. A broker would have more experience at this deal making than either the buyer or the seller in most business sales.

Third party financing

If the company being purchased has a solid financial history that can be documented by a CPA or a business attorney, then it may be possible to get some financing from a bank or a private lending group. The buyer would also have to have a very good credit rating, as the loan will be made to the buyer and the business with both responsible for the loan.

A private lending group may be a little easier to get a loan from, but the interest rate would probably be higher.

It may be possible to get the needed money from relatives or friends in order to make the purchase. In any event is it worth trying all avenues to get the needed funds. The worst that can happen is the answer is no and the deal cannot be made.

Other possible money sources

It may be possible for the buyer to become a majority partner for a time with the old owner in order to make the sale. All of the business liabilities would be the new owner’s problem, but the old owner could be a participant in the business until it is paid in full. This would be a tricky negotiation, but it could be pulled off with a motivated seller.

One source that may have real possibilities is the use of angel financing. This is money put up by an investor or investor group to help a company with good prospects grow. The buyer would be advised to see if this is a possibility as there are many advantages to this way of raising money. The best part being that the money does not have to be paid off until the company is sold or taken public. If the company has prospect like this due to an invention or a new product, then it is possible to attract some attention.

Caveats for both the buyer and the seller

Any financing that is arranged to make the purchase must be based on reasonable growth for the foreseeable future and not a huge increase in business. If the increase does turn out to be better than expected, the buyer will be able to retire the debt sooner. But, the buyer should not count on this in order to make the payments. The payment needs to be structured using conservative projections for the business’s future sales and profit. Any other scheme could be destined to failure from the get go. A payment plan that is based on pie in the sky will work to the buyer’s detriment and the seller will end up with a repossessed business that could be harmed by a desperate owner. This would be a very bad arrangement for all concerned.

The secret is to come up with a plan that will work if everything stays exactly the same. If the business has a steady flow of cash over time, then it is likely that this will continue into the future. This plan will lend itself to completion that is in every one’s best interest.

All business deals are unique

Almost all sales of a business are unique and require a different approach in order to pull the sale off. Fixed multipliers are just guidelines to come up with an asking price and are not set in stone. Subjective values of businesses are the norm and may well be why a pro needs to be brought in to evaluate the business’s value. This is the key to future financing whether it is the seller that makes the loan or another party. If the business is one of a kind it is even more difficult to come up with an asking price. In this case it is even more important to hire a certified business broker Find a business broker near you. Putting a value on an existing business is part real numbers and part a skillful art. At least the pro has some idea of where to start when coming up with a price.

Conclusions

Early in the discussion of the sale of the business, the air should be cleared as to where the purchase money is coming from or if the buyer is going to need to use financing to make the purchase.

The seller needs to let if be known if they are willing to accept terms or finance part of the purchase price. If they are looking for an all cash deal, then this should be stated also.

Laying out the cards early lets both parties know if they should continue the discussion or move on. Structuring a business purchase is all about factual discussions and obtaining the pertinent information. Honest disclosure will move the deal along faster if the discussion is acceptable from the beginning.

If the seller and the buyer are still interested at this point, then further discussions could be held with the hopes of finding an agreement that works for both. Since terms are part of most deals, this is not usually an obstacle. If there were no seller financing then many deals would never be finished as other financing would not be available. As it turns out this is the grease that makes deals slide together and become a win-win situation.

Bill Henthorn formerly was principal broker and owner of a resort / commercial real estate brokerage in Honolulu which specialized in representing sellers in transactions up to $50MM.He currently serves as the marketing director of http://www.acquireo.com

According to CEO Stephen Parker, “We are indeed fortunate for have someone of Steve Rao’s talent as part of the Datacraft Solutions’ team. His contribution is important as we are experiencing significant growth.”

Steve Sandeep Rao, J.D. has joined Datacraft Solutions as a Director in Business Development and Client Executive. Mr. Rao, a native of Charleston, West Virginia, is a businessman and entrepreneur in North Carolina. Steve was Director, Business development for MindLever.com, an e-learning software company, acquired by Centra Software in 2001. Steve is also the founder and Chairman of TSG Academies, one of North Carolina’s leading sports management firms. In addition to his duties at Datacraft, Mr. Rao serves on the State IT Board of North Carolina (appointed by the Governor and the NC State senate) is a Charter Member and Monthly Events Chair of TIE Carolinas (The Indus Entrepreneurs), a global entrepreneurship organization.

Mr. Rao has a B.A. in Political Science from Emory University and a J.D. from the West Virginia University College of Law. Steve resides in Morrisville, North Carolina with his wife Dr. Komal Parekh and their children, Sonia, and Rayan.

Datacraft Solutions (www.datacraftsolutions.com) delivers a revolutionary digital kanban process of automation solutions to lean manufacturers through a secure Internet gateway, eliminating the need to install and maintain a complex IT infrastructure. The company has experienced significant growth in the past twelve months by eliminating complicated, expensive, time-intensive software implementations as well as extensive training regiments and the need for internal support. The Datacraft Solutions’ replenishment supply chain digital kanban lean system allows customers access and fully utilize powerful lean benefits immediately for a low, predictable monthly fee. Services are scalable so manufacturers can design an appropriate digital kanban solution.

Sharing knowledge is also a key new distinction in the replenishment supply chain digital kanban world; as the solutions continue to spread throughout the manufacturing industry, Datacraft Solutions draws upon the insights and experiences of their client base to enhance the functionality of their product offerings.

Datacraft Solutions
www.datacraftsolutions.com
Jerry Bryant
Marketing Manager
jbryant@datacraftsolutions.net
800-819-5326

A lot of reasons exist why you should not only get into business, but also endure in business. You may want to take any of these decisions because of the love of a particular business, because of a need to do so, because you are bound to continue from where someone stopped or because you simply have a feeling to do so. In almost every country of the world, people are looking at the business sector as one of the bests. There are always statistics of these found in all countries. For example, the United States Department of Labor produces statistics which indicate that for almost the first three quarters of last year, unemployment was very high and a lot of people resorted to doing business.

There is no need to trouble yourself on the way your business is going to look like. All that is necessary for you to do is to develop a plan and seek for any of the so many options of securing finance for the business. The following lines are meant to encourage those coming into business and even those already in business to seek for means of financing their businesses:

Loans

This type of finance for a business is common all over the world and it can easily be gotten. In some cases, there is often a belief the loans can easily be gotten by everyone who applies for it. This may be true or false. It all depends on your business plan, the lending policy of the bank and the type and value of security you have. What makes this source of finance much considered is that interest rates on the loans are also reasonable. It should be warned that you should not get into taken of loans without seeking for proper recommendations from experts. Remember that it is always good to know the ins and outs of every type of loan ahead of getting into it.

Angel Financing

This is also another common source of finance that is common among new businesses and even those that are already in existence. What obtains here is that there are so many people who have the willingness and ability to pump finance into any business which have potentials to grow. Angel financing can be a family type. This will involve members of the same family pulling their resources together and investing it to develop a business plan. This is good but not preferable because of the close ties that the members may attach to each other, which may not be best for the health of a business. Angel financing can also be an affiliation angel. This will involve an association of friends willing to see a business plan from conception to completion. Another strand of angel financing is idea angel. These are financiers who are involved at the conception and actual progress of the business. Whatever the form of angel financing that you may opt for, you must get into the set of connections that these angels operate before you can benefit from financing.

Equity Financing

This involves raising money for the business by using what the business owns and can give out to the public. There are individuals willing to pay for equity in the business and even take part in the running of the business. Although this type of financing is common, it may not be available to every type of business. This is the more reason why every business owner must always carry out enough research in order to get the appropriate financing for his or her business.

Learn more about business to business financing as well as tips in getting your cash financing for business when you visit http://www.365capital.com, the free portal on small business financing and startup loan resources.

Infrastructure development is crucial in every country that wants to escalate forward in their economic status. However, there are those that cannot afford because of the lack of resources. The World Bank, established in 1994, is such a vital spring in international business and finance that has been assisting countries all over the world.

It is not a bank, as the name suggests, but a global organization that made of two special progressive institutions. This international business and finance source consists of 184 nations together with the International Bank for Reconstruction & Development (IBRD) and International Development Association (IAD).

Each has a specific responsibility supportive of its mission to alleviate poverty and lifestyle improvements. The International Bank for Reconstruction & Development (IBRD) concentrates on middle income and creditworthy poor regions while the International Development Association (IDA) is on the poorest regions in the globe. Both offers low- interest loans and interest- free credit that also provides education, health, communications and other beneficial purposes.

This international business and finance group also has its own affiliates like the International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Center for Settlement of Investment Disputes (ICSID). IFC grants advisory services, loans, structured finance, equity and management products that build the private sector in developing countries. MIGA promotes global immediate investment into developing nations to assist economic growth, improve lives and reduce poverty. ICSID imparts facilities for the pacification and mediation of feuds between member countries and investors.

Some of the members of World Bank are Afghanistan, Albania, Barbuda, Belize, Chile, China, Denmark, Dominica, Ecuador, Egypt, Guinea, Germany, Haiti, Hungary, Iceland, Indonesia,. Korea, Kuwait, Jordan, Jamaica, Kenya, Kazakhstan, Libya, Luxembourg, Macedonia, Myanmar, Namibia, Nepal, Pakistan, Panama, Poland, Philippines, Romania, Rwanda, Samoa, Senegal, Thailand, Tanzania, Uganda, Ukraine, Venezuela, Vanuatu, Zambia and Zimbabwe. In the International Bank for Reconstruction and Development, it has a total of 184; 165 for International Development Association; 178 for International Finance Corporation; 167 for Multilateral Investment Guarantee Agency and 143 for International Center for Settlement of Investment Disputes.

Since it is an international business and finance cooperative, they gather every once a year at the Annual Meetings to make policies as well as discuss about the International Monetary Fund. Since their convention only happens very seldom, they delegate specific responsibilities to about 24 executive directors who work on- site at the headquarters located in Washington D.C. The biggest depositors are United Kingdom, France, Germany, Japan and United States who are the ones who appoint. At present, the president of World Bank is Paul Wolfowitz who holds a five- year and renewable term. He is accountable for the overall management of the organization and chairs meetings that are called for.

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