What Are My Business Finance Options?
When it comes to gaining funding for your business there are a number of different places and avenues that you can approach but the one that you actually choose to use will be based on your business needs. Some examples of the places that you can turn to in the hope of gaining the business finance that you need are bank loans, family/friends, credit cards, overdrafts and investors. These are only a handful of the finance options that are open to both start-up businesses and established businesses; however in some cases many businesses often choose to use a combination of many different sources of finance in order to cover all of the expenses.
It can easily be said that many new businesses will exhaust the internal financial resources which are needed and used to get your business off the ground during the initial start-up phase. It is because of this that new businesses will then seek additional capital in order for them to continue to grow. The statement it takes money to make money is also never more relevant than it is when it comes to small businesses. This is due to the fact that every small business needs money to get started, operate and expand as well as to grow.
If you are a start-up business and you are at the point where you require outside finance you must clearly identify the purpose of your business finance. The start-up finance that you gain for your business is generally acquired so that you can gain assets for your business. These assets are used to help your business achieve its profit making objectives.
When you start to look for ways of raising business finance you should have calculated roughly how much money you are going to need in order to cover all of your business start-up expenses. By doing this you have a better chance of getting the business finance that you want and that you require. Once you have gained a rough estimate of how much money you are going to need for your business start-up in order to get your business off the ground you can start to think about the various avenues that you are able to approach as a way of securing your business finance.
However when it comes to business finance there are only really two words that you need to consider, these are debt or equity. Debt finance, for example, comes in the form of bank loans and credit cards. Debt finance is money that is lent to your business. It will cover all of your business costs but you are required to pay it back. You will have to repay debt finance on a monthly basis with added interest. Before you agree to take out debt finance it is important that you are able to keep up with the monthly repayments. To find this out you should investigate your expenditure and ensure that you will be able to keep up with the payments sufficiently.
The second word that you need to know is equity. Equity finance is money that is invested into your business for a share of your business. You don’t have to pay this money back at any point within your business but it does mean that you lose an aspect of control over your business.
Within every business there are five main components that are needed in order to ensure that your business operates successfully. These components are Personnel, Equipment, Housing, Products & Services and probably most importantly Capital. Without capital all of the other components wouldn’t exist within your business.
Why Early-Stage Startup Companies Should Hire a Lawyer
Many startup companies believe that they do not need a lawyer to help them with their business dealings. In the early stages, this may be true. However, as time goes on and your company grows, you will find yourself in situations where it is necessary to hire a business lawyer and begin to understand all the many benefits that come with hiring a lawyer for your legal needs.
The most straightforward approach to avoid any future legal issues is to employ a startup lawyer who is well-versed in your state’s company regulations and best practices. In addition, working with an attorney can help you better understand small company law. So, how can a startup lawyer help you in ensuring that your company’s launch runs smoothly?
They Know What’s Best for You
Lawyers that have experience with startups usually have worked in prestigious law firms, and as general counsel for significant corporations.
Their strategy creates more efficient, responsive, and, ultimately, more successful solutions – relies heavily on this high degree of broad legal and commercial knowledge.
They prioritize learning about a clients’ businesses and interests and obtaining the necessary outcomes as quickly as feasible.
Also, they provide an insider’s viewpoint and an intelligent methodology to produce agile, creative solutions for their clients, based on their many years of expertise as attorneys and experience dealing with corporations.
They Contribute to the Increase in the Value of Your Business
Startup attorneys help represent a wide range of entrepreneurs, operating companies, venture capital firms, and financiers in the education, fashion, finance, health care, internet, social media, technology, real estate, and television sectors.
They specialize in mergers and acquisitions as well as working with companies that have newly entered a market. They also can manage real estate, securities offerings, and SEC compliance, technology transactions, financing, employment, entertainment and media, and commercial contracts, among other things.
Focusing on success must include delivering the highest levels of representation in resolving the legal and business difficulties confronting clients now, tomorrow, and in the future, based on an unwavering dedication to the firm’s fundamental principles of quality, responsiveness, and business-centric service.
Wrapping Up
All in all, introducing a startup business can be overwhelming. You’re already charged with a host of responsibilities in which you’re untrained as a business owner. Legal problems are notoriously difficult to solve, and interpreting “legalese” is sometimes required. Experienced business lawyers know these complexities and can help you navigate them to avoid stumbling blocks.
Although many company owners wait until the last minute to deal with legal issues, they would benefit or profit greatly from hiring an experienced startup lawyer even before they begin. Reputable startup lawyers can give essential legal guidance, assist entrepreneurs in avoiding legal hazards, and improve their prospects of becoming a successful company.
Think Twice Before Getting Financial Advice From Your Bank
This startling figure comes from a recent review of the financial advice offered from the big four banks by the Australian Securities and Investment Commission (ASIC).
Even more startling: 10% of advice was found to leave investors in an even worse financial position.
Through a “vertically integrated business model”, Commonwealth Bank, National Australia Bank, Westpac, ANZ and AMP offer ‘in house’ financial advice, and collectively, control more than half of Australia’s financial planners.
It’s no surprise ASIC’s review found advisers at these banks favoured financial products that connected to their parent company, with 68% of client’s funds invested in ‘in house’ products as oppose to external products that may have been on the firms list.
Why the banks integrated financial advice model is flawed
It’s hard to believe the banks can keep a straight face and say they can abide by the duty for advisers to act absolutely in the best interests of a client.
Under the integrated financial advice model, there are layers of different fees including adviser fees, platform fees and investment management fees adding up to 2.5-3.5%
The typical breakdown of fees is usually as follows: an adviser charge of 0.8% to 1.1%, a platform fee of between 0.4% and 0.8%, and a managed fund fee of between 0.7% and 2.1%. These fees are not only opaque, but are sufficiently high to limit the ability of the client to quickly earn real rates of return.
Layers of fees placed into the business model used by the banks means there is not necessarily an incentive for the financial advice arm to make a profit, because the profits can be made in the upstream parts of the supply chain through the banks promoting their own products.
This business model, however, is flawed, and cannot survive in a world where people are demanding greater accountability for their investments, increased transparency in relation to fees and increased control over their investments.
It is noteworthy that the truly independent financial advisory firms in Australia that offer separately managed accounts have done everything in their power to avoid using managed funds and keep fee’s competitive.
The banks have refused to admit their integrated approach to advice is fatally flawed. When the Australian Financial Review approached the Financial Services Council (FSC), a peak body that represents the ‘for-profit’ wealth managers, for a defence if the layered fee arrangements, a spokesman said no generalisations could be made.
There are fundamental flaws in the advice model, and it will be interesting to see what the upcoming royal commission into banking will do to change some of the contentious issues surround integrated financial advice.
Many financial commentators are calling for a separation of financial advice attached to banks, with obvious bias and failure to meet the best interests of clients becoming more apparent.
Chris Brycki, CEO of Stockspot, says “investors should receive fair and unbiased financial advice from experts who will act in the best interests of their client. What Australians currently get is product pushing from salespeople who are paid by the banks.”
Brycki is calling for structural reform to fix the problems caused by the dominant market power of the banks to ensure that consumers are protected, advisers are better educated and incentives are aligned.
Stockspot’s annual research into high-fee-charging funds shows thousands of customers of banks are being recommended bank aligned investment products despite the potential of more appropriate alternatives being available.