Start-Up companies do not need theoretical or impractical advice. They need tips and suggestions that they can easily and swiftly implement to improve their chances for success. In the spirit of this need, here are ten tips in the areas of accounting and finance that they should consider implementing in a hurry:
If you want to sell your business, seller-financing has become an even more common requirement. First of all, seller-financing is common and there are many resources on the Internet that explain the risks and rewards associated with such a practice.
The credit crunch appears to be making seller-financing even more common, although I have yet to see statistics to back that up. It is no secret that the commercial loan market has slowed dramatically, and the number of SBA loans have dropped as well. This has not provided any financial help for small business. Private equity firms are acting much more conservatively, mainly because they employ a strategy of maximal leverage when they buy small companies with high growth potential. The debt financing is not as available as it used to be, and they are not willing to tie up more of their investors’ funds in these high risk enterprises. These and other factors mean a motivated seller needs to be more ready than ever to finance at least a portion of the price of the transaction. This is a reality of the current market in which we operate.
Believe it ot not, there are a lot of things your business can do to make the loan request process smoother with banks. The following blog gives a good list of 10 things you can do pretty quickly: http://www.allbusiness.com/banking-finance/banking-lending-credit-services-commercial/10206901-1.html
Did you know that large companies like IBM, Novartis, Samsung, Intel, and many others have and will continue to be venture capitalists to younger firms? These large corporations are looking for new technologies, products, and services that will enhance or add value to their core business. In return, these smaller and younger firms may be able to benefit from (besides the capital) affiliation with these larger firms from a marketing, operational, and back-office perspective.
Corporate venture capital funds last year invested in 8% of the total $31 billion in venture money that was was poured into young firms, report the National Venture Capital Association and PricewaterhouseCoopers (USA TODAY, 20 May 2008, Companies Give Start-Ups Billions in Venture Capital). The large companies create their own venture capital funds and scour the marketplace for opportunities.
If you are considering venture capital either as an exit strategy or an opportunity to grow your business, perhaps you should consider which large corporations may be interested in what you do. The numbers tell us one thing for certain – large corporations will continue to play a critical role in giving smaller and younger firms access to the venture capital markets. Contact a business financial consultant to help you gain access to the venture capital markets.
Private-equity firms have been lulled into a cheap borrowing trap to magnify their portfolio returns. The downside of all of this – their strategy will also magnify their losses.
The huge trend away from public equity towards private-equity has been exciting to watch. According to most business financial consultants, taking a company public has become so cumbersome and costly that most are deterred from those capital markets. Private-equity came in at a perfect time and used some aggressive leveraged buy-out (LBO) tactics. In essence, they would buy the majority stake of an emerging or medium-sized company by using their own equity to pay-off the shareholders, and then they would use a combination of the newly acquired business’ and the private-equity firm’s capacity to obtain financing to fund the growth and value-added strategies.
Leverage works great when your firm value is on the rise, but it can make life a lot more painful if the company is struggling. With a slow-down in the economy, many private-equity acquired firms are seeing their top-line fall and are having a challenge meeting their highly-leveraged debt obligations. If you are considering an exit strategy of a sale of your business to a private-equity firm, than make sure you understand their plans for funding growth.