How Much Is Enough to Borrow for Your Business?

by Crestmark 25. September 2014 06:25

When you're struggling with meeting the financial demands of your business, you may need access to capital. Whether you're a newer business or you've been established for quite some time, a shortage in cash flow can hinder your operations. It's important to decide exactly how much you need to borrow when you're worried about making payroll, securing supplies for an upcoming special project, or when you need to take care of unexpected equipment repairs. If you borrow too much, you're spending more than you need to on interest and loan repayment and that’s money that you could be spending on other things. If you don’t borrow enough, you'll be scrambling to cover your expenses. 

 

      

Here are some tips for narrowing down your budget to help you determine the amount of working capital you might need:

 

Forecasting Your Future

Use conservative estimates on leads, conversions, sales and profit margins. 

Analyze previous monthly, quarterly and annual reports for a comparable estimate. 

Learn your industry's high and low seasons; not only when they happen, but why they happen. 

Make projections for company growth, in both employee needs, equipment needs, and customer growth.

When you're planning to borrow money for a new chapter in your company's history, factor in the method, fees and interest associated with your financing.

 

New Businesses

If your business is young, it can be even more difficult to estimate how much you'll need to handle growth. A common rule of thumb is to try to cover costs through the first six months of business, but it’s a good idea to build in a safety margin even above the 6-month mark.  Here are expense categories you should analyze: 

Payroll – Add up the salaries and wages for yourself, your employees and anyone else doing work for your company. Include sales, human resources and seasonal help. Don't forget the taxes and fees that must be paid to the government and to any associations.

Marketing and Collateral Expenses – Include the costs of signs and business cards, marketing materials, and product or service development.  

Overhead – Estimate costs for your office and operations, including rent or mortgage, supplies, insurance plans and utilities, business licensure, vehicle registration and long-term equipment. Consider all of the necessities you'll have to purchase, even furniture and computers.

Extra Expenses – Talk to someone experienced in your business or ask a mentor for advice. They would be a great resource for information about expenses, fees and pitfalls you may not have considered. Most business owners are willing to help with hints and experiences that will help other people avoid repeating their mistakes. 

 

Established Businesses

If you've been in business for a while, you may be planning to expand your operations. If you want to get a loan or business line of credit, it's important to organize your books and understand where all of your money is coming from and where it's going. Ensure that you'll have enough funding by making a list of your current and future expenses, as well as your sources of income. 

Start with your routine expenses that are part of your monthly budget.

If you're expanding, list any costs involved in additional personnel, equipment, office space and operating supplies. 

For special projects, total the amount of capital needed to fund. Look at supplies, personnel, shipping and transportation.  

Borrowing the right amount of money can help you grow your business without the aches and pain of overwhelming expenses. Once you've mapped out all of your costs and projected your income, you'll have a better idea of how much you need to borrow. While there's no exact science to estimating the right amount of financing, doing your homework will get you closer to a reasonable estimate.

Keep in mind that you don’t have to go through this process alone. The lending experts at Crestmark can work with you to determine the best solution. Give us a call today! 

 

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Social Media Time Management for Small Businesses

by Crestmark 28. May 2013 05:13


Small businesses are told to have a social media strategy to stay competitive.  For the most part, they know it’s necessary; they’re just not sure where to go with it.  Which social media outlets are most successful?  Which platform will get your company the most publicity? How do you manage your time between the endless amounts of new social platforms being released every day?  With all the other management and marketing strategies your business has going on, social media may seem like the last thing you want to add to your “to-do” list.  However, it doesn’t have to be a stressful process.

Develop a Plan: First and foremost, before just jumping into the social media pool, you’ll need to have a solid strategy.  Don’t just start posting and commenting without a plan.  Know your target audience; get a feel for who you’re trying to reach and what you’re trying to get out of using social media to reach customers. This will help you maintain credibility and relevance as a business.

Test the Waters: So this is your first social campaign- maybe ever.  Don’t panic!  Social media is a platform that doesn’t thrive on perfection.  Use trial and error to determine what engages followers.  Ask questions.  Don’t be afraid to learn from others and even learn from your clients!  Being “new” to social media can be a great excuse to learn and gain respect from consumers who don’t expect you to know all the ropes just yet. 

Start Small: One of the biggest mistakes you can make in your social media endeavors is to take on more than you can handle.  If this is your first ever attempt at going social- don’t create a Facebook, Twitter, LinkedIn, Pinterest, Vine, and Instagram all at once.  It is always better to do one thing really well than to try and haphazardly to have your hands in everything at once. For entrepreneurs—and really anyone in a B2B industry—Linkedin is a great place to start to grow your network.

Track, Track, Track: Keep a close eye on your website analytics and definitely take a few minutes to install a social media dashboard. These custom Google dashboards will not only allow you to see how many people are coming to your site from every social network (whether you have a profile on there or not), but what devices those users are coming from and how those users end up converting.

Have you already gotten started with your social media efforts? Connect with Crestmark on Linkedin today! 

 

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The Internet’s Role in the Rebirth of Mom-and-Pop Shop’s Success

by Crestmark 24. March 2013 07:02

Family-owned businesses were constantly steam-rolled again and again by the all-powerful corporate conglomerates in the 1980s and 90s. These big-box shops were able to offer a wider variety of goods to their customers at a lower price, and their size enabled them to steamroll the smaller and more specialized businesses. Just think, if you had the choice between Starbucks or a shop called “Jim’s Beans,” chances are you drove right past the Beans for the Bucks. 

mom and pop shop

In recent years, however, a quiet revolution has begun to occur. Large companies, no longer able to sustain their growth and too bulky to adapt to changes in the economy and consumer needs, have begun to lose their footing.  As a result, small mom-and-pop businesses are taking advantage of the opening and have once more started to earn prominence.

This “rebirth” has all become a reality thanks to a little thing we all know and love: the Internet. With the growth of online stores, entrepreneurs are able to virtually market their goods all over the country. This increased visibility has led to some small online start-ups becoming extremely successful.

So how is the Internet acting as an almighty equalizing power?

-- For one, low overhead cost.  Having your store online is far less expensive than operating the full-on brick-and-mortar home front. And, if necessary to choose one over the other, it's possible operate the wired store with fewer employees. This enables these business owners to hold tighter profit margins and be more nimble in their pricing strategies.

-- Personal discovery.  More often than not, a consumer will search the web for ideas on what to buy before romping around the streets to shop.  With an easy-to-navigate site advertising your goods, marketing the products in your store is not only manageable; it’s easier.  This is especially true of specialized businesses. Specific goods occupying certain niches are easy to search for and thrive on the Internet.

-- Reaching out to buyers.  Gone are the days where small businesses can only cater to the locals.  Before marketing through the Internet became possible, the power companies that owned distribution channels were conclusively the most successful.  This is no more! With online shopping, the web makes it possible to market products to consumers around the world.

-- Marketing personality. While selling to buyers across the country may seem impersonal, the Internet has created an answer for that as well.  A cozy, interactive atmosphere is maintained through social media outlets.  Business owners can communicate directly with consumers through blogs, Facebook, Twitter, you name it!  This encourages interaction, and participation which helps to foster customer loyalty and relationships that big-box companies can’t compete with.

While an online strategy is beneficial to pursuing growth, what consumers most want to see is diversity.  A street-side store has to focus on making a bigger presence online, while strictly online stores are beginning to develop more physical locations.  With diversity comes the ability to reach as many interested customers as possible.  Technology is constantly changing and improving, therefore; it’s important for small business owners to stay on top of trends and continue growth.

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