Every business requires some form of financing, and under mentioned are some of the common business finance needs:
Fixed Capital Requirement
A business’s fixed capital requirements will depend on the nature of the enterprise. Large enterprises like industrial establishments, shipping companies, and public utilities will require much more money than a trading concern. The amount of fixed capital required by a small enterprise is dependent on the products and services offered. For example, a car mechanic shop will need significant fixed capital to purchase diagnostic equipment and car lifts. By contrast, a consulting firm will need just enough funds to buy an office space and a computer.
A business may require fixed capital to purchase fixed assets, such as land, building, furniture, fixtures, and equipment. However, since this capital is not liquid, it may not fetch a high price if it is sold. This is due to the limited market for these assets or the time required to arrange their sale. While a business may require a large amount of fixed capital for its initial investments, a small enterprise may only require a small amount for its start-up costs.
One of the fundamental needs of a business is cash flow. In fact, without cash, a business cannot function. That’s why it’s essential to monitor cash inflows and outflows and the uncertainty involved in both. One of the primary sources of uncertainty in cash flows is receipts of cash from accounts receivable. Fortunately, this uncertainty is often less of an issue for business finance needs that sell to quality customers.
Cash flow is the lifeblood of any business, and its pace is just as important. Positive cash flow means having enough money set aside to pay off expenses as they become due. Conversely, a business with negative cash flow might find itself struggling to meet its debt repayments or raise capital. To prevent these difficulties, it is vital to keep a close eye on cash flow, both in terms of timing and amount. Below are some tips for managing negative cash flow and increasing positive cash flow.
Credit card cash advance
When a merchant needs a small amount of cash quickly, they can obtain a credit card cash advance. While these cash advances are easy to get, they can be expensive as well. Merchants should carefully consider the fees and terms associated with such a loan before accepting one. A credit card cash advance line will typically only be a portion of the overall credit limit of the card. However, most issuers make it easy to check the cash advance limit online or on their monthly statements.
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