General Business and Finance Blog

There are different other choice for trade main financing. Knowledge of else about them can really be to your promote. And in acting so, you will not lightly bestow up on your official during the majority trying days, mainly if you recognize there is an enterprise that you can rotate to for a business cash advance. So if you have gone out of considerable essential chief, attempt to draw near a funding concern about this affable of choice.

At one show or different, your trade will be in a position where money is poorly required. For short and middle-extent Corporation, a trade money advance will relieve suitable you’re necessarily. Embankment loans can be a choice for you at first, but next you are refused, you will find out how frustrates it may be to obtain money for businesses that are quite development.

Reason 1 – quicker Financing

Embankment loans will get months ahead you acquire the cash. Further, there is very minimum fortuitous that you will obtain it, not to refer all the required document function just to acquire authorized of borrow. But with the trade cash forward lend, the expectant procedure will single take minor than a week. If your request has been authorized, the cash will be advanced to your trust card in as promptly as 48 periods.

That is one kind of argue for you to promote a money advance over bank lends. A rapid financing is necessary as good. This is the reason why they don’t allow you expect for too lengthy before delivery you the cash.

Reason 2 – No-chance refund method

Refund proceeding with MCA is made direct trust card treatment. The quantity is founded on your everyday credit card auctions. The supplier will get the assent interest from your official sales every month till the money advance is pay back.

Last and not our list of reasons you should acquire business cash advance , pay sheet. If for any reason your corporation has trouble making pay sheet because of different compulsion on your bankroll you should do whatever you may to create payroll, it is very essential that you are fit to pay your worker. It would be very costly to miss your worker because you were not fit to pay them on a sole pay period.
This kind of business financing is suitable for any kind of businesses. Whether you proper a food shop, eye clinic, dress store, instrument store or any short and middle businesses, you may help the business cash advance. Again, there is no necessary to have a better trust note history right to help the money advance.

I hope this article will help provide a better understand of the complexity of the situation and express an enhanced perceptive of the policies regarding Cash & accrual accounting, Cash Basis & Accrual basis – the two main methods of recording accounting dealings are cash basis accounting and accrual basis accounting. Each method has both advantages and disadvantages. But, only one method is approved by generally accepted accounting principles (GAAP)

Review of Cash & accrual basis accounting:

My article discussed briefly cash and accrual. Of accounting method, the system should help with decision making in a risky environment and calculate taxable income. The majority producers keep their records with the cash receipts and disbursements method or with an accrual method.

The reality of small business is that many companies keep their books on the cash basis because it’s simpler to understand sort of like running the business out of your checkbook and as it often coincides with the method they file their tax returns. On the other side, far more small businesses (and all large ones) maintain their books on the accrual basis, frequently for one or more of three reasons:

• They’re troubled about gross margin on products they sell.

• They want to actually know when they’re building money and when they’re not.

• They’re necessaries by lenders, investors, or government authorities to report their tricks that way.

Clarity of Cash basis accounting:  -a method of accounting in which financial transactions are recorded only when cash is involved. Similar to keeping a checkbook, a sale is recorded only when the cash is received, and an expense is recorded only when a check is written to pay for it. In the above example of income, the actual sale would not be realized until the cash from the credit card transaction is received. With the expense example using the cash method, the expense is not actually realized until the offices supplies are actually paid.

Clarity of Accrual basis accounting – the more common method of accounting in which financial transactions are recorded when they actually happen, even if the payment is made later. Accrual basically means to gather or to increase. With the accrual basis of accounting, expense and income are realized when they actually occur.

I. Income example:  while a business sells a product and the customer pays with a credit card, the income from the sale is essentially realized at the time the sale is prepared.

II. Expense example: If the company buys office supply and is given 30 days to pay, the expense is essentially posted (accrued) at the time the supplies are recived

Cash Basis Accounting versus Accrual Basis Accounting

01. Cash basis accounting: The main difference between accrual basis and cash basis accounting is the time at which income and expenses are recognized and recorded. The cash basis method generally recognizes income when cash is received and expenses when cash is paid.

Accrual basis accounting: the accrual method recognizes income when it is earned (the creation of assets such as accounts receivable) and expenses when they are incurred (the creation of liabilities such as accounts payable).

02. Cash basis accounting: Cash basis accounting is the method in which cash proceeds and cash payments are recorded through the period in which they occur under the cash basis accounting method, the revenue is recognized when the cash is received and the expense is recognized when the cash is disbursed. “Cash-basis accounting does not recognize promises to pay or opportunity to receive money or service in the future, such as payables, receivables, and prepaid expenses”

Accrual basis accounting: When revenue is recognized before cash is received, it is recorded in an accrued revenue account, such as accounts receivable. When revenue is recognized after cash has been received, it is recorded in a deferred revenue account, such as unearned revenue. When an expense is recognized before cash is paid, it is recorded in an accrued expense account, such as accounts payable

03. Cash basis accounting: there is no inventory account under the cash basis method. Goods and materials purchased for sale are recorded as direct costs in the period that payment is made for those goods and materials.

Accrual basis accounting: the inventory account is used under the accrual basis method. Goods and materials purchased for sale are recorded as current assets, and cost of goods sold are recorded in the period that the goods are actually sold

Apply by generally accepted accounting principles (GAAP)

There are two ways companies can keep their accounting books – Accrual and Cash-Basis. The accrual basis is used by most companies; only very small businesses use cash-basis.

Under the accrual method, expenses and revenue are recognized in the period they occur regardless of whether a cash transaction has occurred.  For example, if a sale is made in January but payment is not expected until February, the revenue from the sale would be recognized in January (when it was earned) and the amount due to the company is recorded (accrued) in accounts receivable.  Below are the Journal entries for the “sale on account” and the “payment on account”.

2010.Nov.05 : Accounts Receivable= 5000

Sales Revenue= 5000

(Sale on Account)

2010.Dec.05: Cash=5000

Accounts Receivable=5000

(Payment on Account)

2010.Dec.05 Cash=5000

Sales Revenue-500

(Received Cash from Sale)

Notice that the first entry above recognizes the sale in January, when it actually occurred. This method matches the revenue from the sale to the expenses incurred during the same period. On the other hand, under the cash-basis method, the revenue would not be recorded until February when the cash is actually received, as in the example journal entry below.

While this method is easier and requires fewer journal entries, the sale revenue would not be matched-up to the expenses the company incurred to make the sale possible.  For example, consider the salesperson’s salary that made the sale. Assume payroll expense is recorded in January. Since the revenue is not recognized until the next period (month), the accounting records do not portray a true picture of what actually occurred.

Under the cash-basis method, this mismatching of expenses and revenues would also occur if payment was received right away (in January), but the salesperson’s salaries where not paid until February.

Conclusion: All publicly traded companies publish their financial statements using accrual-basis method the accrual basis is also “required for all businesses that handle inventory” If the accrual basis method is used, it must be used for all financial reporting purposes. However, those that operate multiple businesses may use different accounting methods for each business.

My aim is not to tell which accounting method is best for you although like most professionals I prefer accrual accounting because it gives most business owners so much more helpful information. Rather, I want to help you understand the differences between accounting methods so you can make the better choice. But regardless of which method you use, you’ll keep in mind the importance of looking at the other method in some fashion, so you can get the benefit of the management

Today’s economy and high unemployment rates are pushing most of us to explore the option of putting up our own small businesses. You will get to handle your own money, there is no risk of lay-offs, and it is a great opportunity to explore your skills on handling your own business and company. However, more banks nowadays are enforcing stricter rules and guidelines for giving out business loans.  A bad credit history may be one of your concerns for getting rejected for a loan, and this makes it difficult for us to get the financial help few need to get started. Like every other bank or lending institution, risk factors have to be taken into consideration before they hand you their money. The credit card services you have availed and how you paid these services are very important information for these companies because it will be their basis on the approval (or disapproval) of your request, and the rate of interest they can give you. All in all, it is a tedious and stressful ordeal to go through.

Fortunately, there is now an easier way to get a  small business loan without the fear of your own credit card history. Getting a business cash advance is a faster and less stressful way of getting and paying off a business loan. A business cash advance is a lending service offered to business owners who accept credit cards as payment for their goods or services. It has a shorter processing time and you can even do the transaction online. This is ideal for those time-dependent money problems you naturally experience with your business. It usually only takes a few days to a week to have your request processed and approved, with the money transferred to your own account. All you need to do is fill out their forms (available online) and qualify for their basic requirements.

The requirements are quite similar to those of most lending institutions, but your credit history would not be put under too strict reviews. In fact, unlike business loans from the bank, bad credit history is not that big of a deal for cash advance providers. You only need to be of legal age; have a registered business in the US; have a small business that processes credit cards for payment; and have been in business for at least a year. You can use the money to start or franchise your own business, refinance a business debt, buy new equipment or purchase goods, and pay of f debt or taxes.

The payment terms for a business cash advance is, of course, different from that of a business loan from the bank. But in general, the payment terms for this lending service will greatly depend on the amount of money you will be borrowing. The higher the amount, the longer the term period. For banks and other big lenders, payment terms for business loans can be paid off in long term or short term. Small business loan payment in banks usually does not exceed five years.

Payment terms for business cash advance canbe instant or can be done on a monthly basis, it all depends on your capability to pay, and the amount of money you borrowed. The payment terms will usually require you to pay the cash advance company each month and you will get the payment structure with the amount that they expect you to pay every month. If you can afford to pay it off all at once, then the better.

A business cash advance is a great way to fund your small business because it is convenient and easy to apply for. All you need now is to choose a legitimate cash advance lender to get started.

Home-based work has is already becoming the best choice for people to earn a living even though it used to be an idea that nobody believed it would click. There are so many different choices to earn outside your home. But this write-up will be suggesting some home-based business ventures that are superbly cash generating. Read on and start earning!Be a Yoga instructor. Yoga is a thing that most people enjoy practicing because it is not just a workout but it also makes them feel relieved after finishing it. A problem is there are only a few yoga instructors in certain areas. You can be a yoga instructor at home and teach those in your neighbourhood.
Be a Tutor. There will be a no shortages of students in school, may it be primary, secondary, or tertiary level. You could be a tutor if you have an expertise in a chosen subject. Tutors get a huge income by helping coach students and if you are an expert you can get lots of customers.
Be a Web designer. Most businesses are beginning to turn to the internet to help their business grow. With no skills on web designing is a dilemma most of them face. There is a big need for expert web designers. If you can design a website you can earn a lot by helping businesses and others building websites.
Become a Photographer. Weddings, family portraits, and senior pictures are just some of the many events where a photographer is required. Photography is a business venture that is not the easiest way to earn but if you take good pictures there are lots of job opportunities for you.
Be an Interior designer. Do you have a keen eye for details? If so, then you can be an interior designer. There are lots of people who are willing to shell out a wad of cash to interior designers to decorate their houses. If you are very much into details of houses, then this job is for you.
Become a Chef. Two options could be: catering or personal. A catering chef will offer a lot of food for occasions such as weddings, birthdays, graduations, etc. A personal chef shall be hired by an individual or family to make them their meals, in a smaller quantity than a catering chef should. If you love to cook and is an expert on the kitchen, then you could be in demand for this business venture.
There are lots of unique home business ideas presented in this article. Hopefully you saw the right one for yourself. Yet, never limit yourself to these ventures. A lot of ventures are out there and if you never found the one that surely suits you in this write-up do not get disappointed. Keep searching and hopefully these could turn into an idea. If you searching for reliable home business information log on to our website http://www.homebiz-information.com for the perfect home business venture. Everything there had been individually tested.

To see more noteworthy ideas, please visit : http://www.testmyidea.com

Every business loan is a risk for both the lender and the borrower. A promising business gives you the best chances of having your business loan request granted.

Lenders will usually look at your gross annual sales and revenues, credit score, checking account balances, profitability, and length of time you’ve been in business. For newbies in the business world, expect to be asked intensively about your business plans.

Your history with credit card services is a main factor for lenders. Credit information they usually look for are personal credit card debt, personal loans, liquid assets, real estate holdings, tax returns, and personal financial statements. Your personal spending habits will also be an issue, including how you use credit card services and instalment debt. If you have a good track record of all of these, then you won’t have any problems with getting you business loan approved. But what if you have bad credit history? What alternatives do you have?

The answer is getting a business cash advance in place of a small business loan.

A business cash advance is the alterative option for business owners who need emergency funding. It is ideal for business owners subscribed to credit card services and/or charge cards. Monthly payment this type of business loan is done through batched credit card sales.

Approval for this type of small business loan takes a shorter amount of time and bad credit scores won’t be too much of an issue. The processing time for cash advance application is from 24 tp72 hours only. Some cash advance lenders can lend as much as 00 to 0,000, depending on their evaluation.

Cash advance as a small business loan is very likely to get approved as long as you pass the basic requirements for the advance. First, you’re business should have been operational for at least a year. Your company should also at least have profits of 00 in credit card processes per month.

The difference between a business cash advance and the usual small business loan are:

(1) A business cash advance does not require a detailed financial statement. Conventional business loans require 2-3 years worth of financial statements.

(2) Audited tax returns are not required for cash advances. Business loans from banks do.

(3) You only need to provide a guarantee against fraud or intervention.

(4) Application fees are not always required for this alternative business loan.

(5)No need for high credit scores. You only need to be subscribed to credit card services.

(6) Your collateral does not have to be all of your business assets.

(7) You can opt for a flexible monthly payment.

Cash advance as a business loan allows you to do almost anything for your business. You can pay taxes or debts, buy supplies, pay your employees, make repairs or remodelling, inventory, make new marketing and promotion materials, and expand your business establishment.

The idea behind cash advance repayment is not like the payment process for a small business loan. Repayment is made by automatically debiting an agreed percentage of your credit card sales every time you batch. There are no fixed payment schedules. You will only be able to pay when you’re customers pay.

Cash advance as a small business loan is very ideal for restaurant owners, retailers, medical clinics, and other new industries. Staying afloat for small business is harder, especially with the recession, and a cash advance is a quick solution for those emergency financial situations. After all, maintaining continuous cash flow for young establishments is difficult. With cash advance as an alternative business loan, you can get cash sooner and pay your loan easier.

Every business loan is a risk for both the lender and the borrower. A promising business gives you the best chances of having your business loan request granted. Lenders will usually look at your gross annual sales and revenues, credit score, checking account balances, profitability, and length of time you’ve been in business. For newbies in the business world, expect to be asked intensively about your business plans. Your history with credit card services is a main factor for lenders. Credit information they usually look for are personal credit card debt, personal loans, liquid assets, real estate holdings, tax returns, and personal financial statements. Your personal spending habits will also be an issue, including how you use credit card services and instalment debt. If you have a good track record of all of these, then you won’t have any problems with getting you business loan approved. But what if you have bad credit history? What alternatives do you have? The answer is getting a business cash advance in place of a small business loan. A business cash advance is the alterative option for business owners who need emergency funding. It is ideal for business owners subscribed to credit card services and/or charge cards. Monthly payment this type of business loan is done through batched credit card sales. Approval for this type of small business loan takes a shorter amount of time and bad credit scores won’t be too much of an issue. The processing time for cash advance application is from 24 tp72 hours only. Some cash advance lenders can lend as much as 00 to 0,000, depending on their evaluation. Cash advance as a small business loan is very likely to get approved as long as you pass the basic requirements for the advance. First, you’re business should have been operational for at least a year. Your company should also at least have profits of 00 in credit card processes per month. The difference between a business cash advance and the usual small business loan are: (1) A business cash advance does not require a detailed financial statement. Conventional business loans require 2-3 years worth of financial statements. (2) Audited tax returns are not required for cash advances. Business loans from banks do. (3) You only need to provide a guarantee against fraud or intervention. (4) Application fees are not always required for this alternative business loan. (5)No need for high credit scores. You only need to be subscribed to credit card services. (6) Your collateral does not have to be all of your business assets. (7) You can opt for a flexible monthly payment. Cash advance as a business loan allows you to do almost anything for your business. You can pay taxes or debts, buy supplies, pay your employees, make repairs or remodelling, inventory, make new marketing and promotion materials, and expand your business establishment. The idea behind cash advance repayment is not like the payment process for a small business loan. Repayment is made by automatically debiting an agreed percentage of your credit card sales every time you batch. There are no fixed payment schedules. You will only be able to pay when you’re customers pay. Cash advance as a small business loan is very ideal for restaurant owners, retailers, medical clinics, and other new industries. Staying afloat for small business is harder, especially with the recession, and a cash advance is a quick solution for those emergency financial situations. After all, maintaining continuous cash flow for young establishments is difficult. With cash advance as an alternative business loan, you can get cash sooner and pay your loan easier.

To be a successful entrepreneur, a lot of things are very essential. You have to be confident, shrewd enough to deal with the various customers and have the guts to survive in the industry. Along with these, you are also required to have ample finances so that you can readily invest to meet the dead lines. However, there may a time come when smallest of the finances are not available with you. Certainly it will affect the proceedings of your business. But with the help of small business finance, you can easily tackle these matters. Small Business Finance, are offered to borrowers which enables them to meet various financial requirements like purchasing raw materials, upgrading machinery and tools, paying off existing business debts, hiring workers etc. These loans can be sourced from various lenders like banks and financial institutions. The loans are tailor made to suit the prevailing circumstances of the borrower.

To access the loan, borrower must be ready to provide documents like past sales report, bank statements etc regarding his business concern. Basically lenders would like to see the nature of business and the profits and whether the borrower will be able to repay the loan amount or not.

These loans are beneficial in the sense that it does not require any collateral to get approved. This implies that it is unsecured in nature. The amount approved is in the range of £1000-£25000. The amount is required to be paid back in a period of 6 months -10 years.

Since the loan is offered for business purpose without any asset for a short time, interest rates for the loans are slightly higher. This is done to cover the risk factor associated with the loans. But with a proper research of the market, borrower can find lenders offering competitive rates.

As the loan amount required is urgent, borrower can instantly access the loan amount using the online mode of application. The approval of the loan is very fast here. Besides the over all cost of applying for the loan here is cheap here. But before applying for the loans, it is better to compare the quotes of various lenders to gain the best out of these loans.

However, small business finance should be used only when there is shortage of cash. Availing these loans regularly will certainly affect the credit status of the borrower.

The saying “you have to spend money to make money” is too true. In order to get your business off the ground or even to expand an existing business it is necessary to lay out quite a bit of money. If you do well, you will make the money back and more, and it is a good investment. But no matter how you get the money, it needs to be spent initially.

Like most people, you probably don’t have much spare cash lying around. Even if your business is doing well and growing rapidly, you still would not want to tie up huge sums of your own capital into upgrading your venture. This is where business financing comes in.

Its popularity arises from the fact that it offers many alternatives, to new companies, ones looking for growth, or those that are just strapped for cash temporarily. Business financing is great because it allows you to achieve your aims when you’re setting up a business or want to grow, and keeps you afloat in those rainy, stormy days. So your dreams are never sandcastles in the air, and you’re always in business. Business financing makes sure that the show goes on.

One of the most basic business financing options is overdraft protection. This is protection that allows you to exceed what you have financially available. Because most institutions cap overdraft protection at around $5,000 for businesses, this is not viable for major expansion or start up. But it does help if you had a bad month but you have some supplies to buy.

Operating lines are among the more popular business financing options. This is because they allow you to dip into a line of credit that acts as additional cash flow. This is usually to help with minor expansion to increased operating costs due to other factors. You do have to pay the money back, but the line is usually very easy to dip into, and it is usually there when you need it.

Term loans are among the most common business financing options for start up businesses or major expansions. These are loans that can run up to more than $100,000 and can be either variable or fixed rate loans. They help you get your business off the ground by allowing you to buy or lease a facility and then outfit it with all of the trappings of a business.

Related to term loans are government options that can help you get started. Government loans and incentives usually carry lower interest rates. However, you often need to show special need or have special qualifications for government programs. However, before getting your money from a bank, check into government programs to see what is available.

In the final analysis, though, there’s nothing like a credit card to help you out in a crisis. While not practical for major costs like your initial investment in a new business, they can come to your aid in various circumstances. Like when you need to meet a pressing payment for your purchases for instance. And you can take advantage of the many business cards on offer today, they carry reduced rates of interest, and reward point incentives that work to your benefit in many ways. Not only do you get instant credit when you need it, but you can also manage your company and its finances in a highly efficient manner.

If you are involved with any business, then you may have come across some occasions where you did not have any funds to perform some of the tasks. Arranging finances and exploring newer options is always going to be a tough proposition. But now with small business finance, you can easily overcome the problem of cash deficit. The loan is designed to finance all your business requirements without any considerable delay.Small Business Finance is offered to all kinds of borrowers. It incorporates existing business owners as well as individuals who are new. Based on the need and requirement you can employ the services of the finances to meet any demands like purchasing a property, construction of store house, making payments towards the staff, paying off debts, promotion, furniture’s etc.

The finances are easily available and are accessible in two forms i.e. secured and unsecured. If the finances required are large then it is preferable to opt for secured option. This option can only be availed if you are ready to pledge any valuable asset as collateral. Based on the equity value of collateral, lenders approve the amount. The presence of collateral assures the lender that the amount is safe and the lenders in turn lower the interest rates. This is of course very beneficial.

If in case the financial requirement is not very large and you need it on a short term basis, then you can apply for unsecured form of the finances. This option does not require any collateral and paves the way for borrowers like tenants and non homeowners. Since these loans are approved without any collateral, interest rates for the loans are slightly higher.

The finances are available in the financial market and can b e sourced from various lenders like banks, financial institutions and other. But with the introduction of online mode, most of the borrowers prefer to avail the finances using the online mode. It is because the application form is simple and you can access the amount in quick fashion. Before availing the finances, you must not forget to compare the quotes to arrive at a better deal.

Before opting for the small business finances, you must make a plan on the basis of which you can derive the exact required amount. Other wise it may create some problems while repaying.

It is difficult for businessmen to concentrate towards the growth of his business if he is short of finances. Also financial help is a must for people who want to start their own business. Small business finance helps you with all your financial needs. It is meant for small business houses and can be availed in two forms secured and unsecured small business finance. It is also open to people suffering from bad credit history.

BASIC INFORMATION ON SMALL BUSINES FINANCE

As the name suggests small business finance is meant to provide financial help to small business houses. You can also avail small business finance if you want to start your own venture. Small business finance is basically of two types, secured small business finance and unsecured small business finance. To avail secured small business finance you will have to place one of your properties as collateral against the loan amount. This can be any of your property like car, home, bank account etc. Placing a security helps you to avail small business finance with lower interest rate and flexible repayment duration. Also you can avail large amount of money by placing collateral of high equity. On the other hand no such collateral is needed to avail unsecured business finance, but the interest rate is slightly higher compared to secured business finance and also the repayment duration is shorter. Small business finance can also is availed by people suffering from bad credit history.

SMALL BUSINESS FINANCE: ADVANTAGES

Small business loans are advance to businessmen running small business or those who want to start their own venture. Small business finance is available in both forms, secured and unsecured small business finance. If you don’t want to risk your property you can avail unsecured small business finance, but if you want to avail loan at low interest rate secured business finance is the best option for you. Small business finance open to all be it good credit borrower or bad credit borrower. Anyone suffering from arrears, defaults, CCJ, IVA, bankruptcy etc can also avail the benefits of small business finance.

SMALL BUSINESS FINANCE: SUGGESTION

While applying for loan, always give preferences to a well known lender having good reputation in the market. Also search well before applying for loan. With good research you can avail a lender offering small business finance at reasonable interest rate. Small business finance is the best option for small business house and for people wants to start their own venture.

Investors and Equity

Practically every economy is built upon the backs of small businesses and entrepreneurs. Every day someone comes up with an idea that will make a great business. Every day, these same people wonder how they will come up with the cash to get the business off the ground. The classic answer is to look for investors, and this is where things can go bad.

If you’re seeking investors for your business, you are going to need to form a business entity. Corporations and limited liability companies are the most popular, and give you the ability to trade ownership interest in exchange for cash contributions. With a corporation, investors will buy shares in the corporation. With limited liability companies, the investors will buy membership interests. Regardless, this traditional exchange gives rise to a problem common among small business owners, to wit, giving away too much equity.

From Joy to Misery

A common mistake made by new business owners is to give away too much equity when getting initial cash contributions. This occurs because you let insecurities impact you evaluation of the business. Instead of giving away two percent of equity in exchange for $50,000, you give away ten percent. Let’s look at an example.

I start a business selling digital gadgets. I prepare my business plan and realize I need $250,000 to get everything up and running. I have $50,000, but need to find the rest somewhere. I form a corporation with 1,000 shares and start approaching potential investors. I offer 100 shares for $25,000. I find five investors that give me $125,000 in exchange for 500 total shares. In summary, I now have $175,000, but have given away half the equity in the business. While I am not happy about this, I am still so enthused about the business idea that I shrug it off.

The business gets rolling and I start selling gadgets like a madman after one year. This gives rise to a serious cash problem. I am getting orders, but can’t fill them because of cash flow problems. To make a proper go of the business, I need another $100,000.

Where am I going to get $100,000? My business is only one year old, so a bank won’t touch it. My investors haven’t seen penny one back, and are unwilling to put more money in. My only option is to sell another 400 shares for $100,000. Fortunately, I sell the shares, raise the money and stay in business. However, there is a major problem.

In raising all of this money, I have now sold off ninety percent of the equity in the business. I am left owning 100 shares and only 10 percent of the business. This is going to severely impact my physical, emotionally and overall motivational well being. Slowly but surely, I am going to become very bitter. It was my idea and I am doing all the work! It isn’t fair that I only own 10 percent of the business!

On second thought, this impression may come on very quickly. Regardless, the business is destined to experience major problems because the primary motivating force is no longer motivated. Unfortunately, many people with business ideas run into this problem.

If you are starting a business, guard your equity at all costs. Selling equity should be a last resort. Try to get loans or trade profit sharing in lieu of selling equity. If you must sell equity, do so only in small percentages. You do not want to the small business person in the example above.