The Benefits of Credit Card Funding

By Odysseas Papadimitriou

Reposted from Mashable

Thinking of using your credit card to finance your startup? For some entrepreneurs, it’s the only way to get their new business off the ground. Still, it comes with plenty of risk.

The Benefits of Credit Card Funding

• The ability to retain maximum equity:  People willing to take the risks associated with launching a startup generally believe that they have a potentially very lucrative idea on their hands. The further you can take your company without outside help, the more of your company you can keep for yourself and the less oversight you’ll have to deal with.

• 0% offers:  The ubiquity of low interest rates has made it common practice for banks to offer extremely attractive packages. The ability to escape interest for more than a year on either upcoming purchases or funding expenses already incurred would certainly help your company’s bottom line. The best offer currently available is the No Balance Transfer Fee Slate Card from Chase, which offers 0% on purchases and balance transfers for 15 months and does not charge a balance transfer fee (most cards charge 3%).

• Lack of collateral:  If you go to a bank and ask for a business loan or a business line of credit, they will want collateral.  If you want to bring on investors, they’ll want equity.  Credit cards, on the other hand, are unsecured.

The Cons of Credit Card Funding

• No separation between business and personal:  When you use a credit card to fund a business venture, the distinction between your business and personal finances largely disappears.  This is important for three reasons: 

1. It presents the possibility for personal credit score damage: Startups are inherently risky, and when you use a credit card to fund one, you are gambling with your personal credit score.
2. You are personally at risk for a lawsuit: If credit card debt proves to be the downfall of your company, debt collectors will likely be able to come after both your company and your personal income/assets to recoup what you owe.
3. Credit cards might be unattainable:The fact that business credit card underwriting has more to do with your personal credit standing than that of your business might help you get a better credit card, but it could also have the opposite effect.  Past personal credit problems could keep you from getting a credit card that will truly help you grow your business.

• Potentially low limits: Because credit cards are unsecured, they generally provide lower spending limits than secured alternatives.  Sure, you could get up to tens of thousands of dollars to play with, but there is usually an invisible ceiling around the $50,000 mark.

• Overextension:  The potential to spend more than you can afford to pay back is not a negative unique to credit cards.  Misuse of any small business funding vehicle can put you in the hole, which is why you should handle them with extreme care.

Ultimately, regardless of the funding method you decide upon, simply throwing money at a startup does not guarantee eventual success, Papadimitriou said. “Efficient use of this money as well as a lot of hard work and a little bit of luck are also essential,” he said.

Four tips to keep your team motivated!

   Every small business needs to motivate their employees in order foe the
   team to work more efficiently and produce better results. Using
   monetary and other rewards to improve motivation is a simple idea, but
   doing it fairly and effectively can be challenging.
   Therefore the difficult question is ‘How can you create a compensation
   program that motivates employees, results in a more productive staff
   and is administered fairly and effectively?’ Here are some valuable
   tips.

   







   1. Establish an action plan: Set realistic goals in your action plan.
       You must always reward top performance and must be as clear as
       possible in establishing realistic and fair goals. This is because
       effective communication is the key ingredient for the entire
       program.

    2. Be creative in determining rewards: Before you launch the plan,
       decide the reward. The reward need not always be cash. Recent
       studies have proven that non-cash rewards are more attractive and
       effective than cash rewards. Offering flexible working hours and
       the occasional Friday afternoon off have proven to be great
       rewards. If cash flow is a problem, then why not implement non cash
       rewards to motivate your staff!

    3. Group rewards may be appropriate, but don't undermine individual
       initiative: Most businesses tend to reward the group and limit
       individual rewards as base pay to keep the simplicity of the
       program. However, that may result in lowerindividual initiative and
       innovation. It is important for individual contribution to be
       valued separately to the group when it is outstanding.

    4. Finally, it is important to keep motivation going:Once you have
       achieved success, don't forget to celebrate! Keep thinking of
       creative ways to increase your motivational strategies, including
       making use of retreats, team-building exercises and travel where
       relevant. Always keep in mind that a motivated workforce will be
       happier, more productive and more profitable, and it ensures a fun
       place to work.

Get ready For the Post-Christmas Cash Flow drought….7 ways to stay ahead!

The global financial crisis is squeezing credit and bank overdrafts and trade payments have been slowing. Therefore, small businesses should support themselves for an economic slowdown in the wake of chaos in international finance markets and a decrease in the value of the Australian dollar. They should be keeping a close watch on cash flow, considering the most appropriate finance options and improving administration processes. Here are some helpful tips to help your business survive and thrive in challenging market conditions!

1.       Get Organised - Keep summaries of all purchase and sales invoices and petty cash dockets. Importantly, keep your bank statements safe as they are a record of your payments and receipts.

2.       Always check the credit status of a new customer - Risks must not be underestimated in the eagerness of taking on new business. Credit checks can be done quickly and are relatively inexpensive.

3.       Chase overdue accounts regularly - take prompt action to follow up overdue accounts by telephone and check customers whether they have received invoices.

4.       Look for more flexible funding options – why not look into Debtor Finance or a line of credit.

5.       Review your suppliers - review the prices of all your suppliers are charging you. Are you too loyal to your suppliers for the wrong reasons? Think of the effect of 10% reduction in cost on your profits!

6.       Dusts off your business plan- try to reconstruct a winning business plan in 2012. Keep an electronic copy to make sure changes are easier to track.

7.       Call in a business consultant – A dedicated financial consultant can help you plan effectively and take advantage of opportunities on the horizon. If you would like more information on Business Consulting contact James Solomons on (02) 98683900 or james@elitefinance.com.au. 

Become a 'Rainmaker' in your business!

You may know what business to start, how to gather the resources; but if you do not know how to sell, then you might as well close the doors!

As much as you may dread of prospect of selling, your business needs customers, without which you are doomed. Regardless of whether you are a one person business or a big venture project, your goal needs to be to become a ‘rainmaker’ and attract new customers. Here are five useful steps to that can help you become a ‘rainmaker’:

1.       Find the WHY. Any business can sell a product/service and its benefits. To create a truly lasting relationship with your customers ask yourself why your business does what it does. Once you know communicate it. Apple sells ‘Think Differently’ – they just happen to make great computers and phones.

2.       Be well prepared and confident before you meet with a new customer or make a first sales call.

3.       Determine the competition. Know other ways your customer can get same kind of product or service that you offer. Find out as much as you can, including the price and benefits they are offering.

4.       State your benefits by listing down all the reasons why the customer should do business with you or buy your product such as reliability/durability of the product.

5.       Quantify the benefit. Determine what the benefit actually translates to for that individual or business.

Cloud Computing: How it can help your business!

Cloud Computing – Practical Solutions

The new era in computing is here. A new way to minimise costs, maximise efficiency and best of all run an effective business. These may sound like dramatic claims, but ‘cloud’ computing is rapidly changing the way business is done. This is not just some fad for corporations with a huge budget either – it’s a cost effective solution that is coming to a small business near you!

What is Cloud Computing?

Essentially ‘cloud’ computing is utilising any subscription-based or pay-per-use service that, in real time over the Internet, completes essential or business related tasks for you. It’s outsourcing for the web generation. You don’t need to store your data locally or pay for expensive software licenses, with information instead being stored on secure servers in the ‘cloud’ that are accessible 24/7 wherever you are in the world. All you need is a computer or smart phone with an internet connection – it’s that simple. Data is always up to date so you can make important business decisions on the go.

Costs

The costs for cloud computing services vary, but in essence are much cheaper than traditional software services. Accounting software provider Xero (EFS Business Partner) starts at only $29 per month and allows much greater flexibility than locally stored software. The costs and dangers of storing information locally also mean that cloud computing is a logical choice for many businesses. Some cloud services are even free when supported by advertising!

Uses

The ‘cloud’ in action:

1)    Businesses can cut a big chunk out of their expenses by choosing to shift employees onto online call and communication services where businesses only required to pay minimal costs – from reduced rates for calls to even just the cost of broadband services or similar. Using technologies such as VoiP, people can talk face to face over the internet, making use of video and audio technology. This assists businesses to not only communicate easily and cheaply, but also makes it possible for people to have meetings with clients remotely which in turn drastically cuts down your businesses traveling costs as well as minimising the downtime of frequently travelling employees.

2)    Certain online tools can help you structure your day and keep track of what you are doing. ‘Toodledo’ is an online service allows you to organise and sort your tasks on a tiered model, enabling you to categorise things by priority. It is also fully optimised for mobile devices, helping you keep organised on the move. Google’s to-do list service also provides links directly to your Gmail account, providing easy access for any company that already uses Google’s services like YouTube, Adwords or even Analytics. The system is maintained on cloud servers, ensuring that it works quickly while data is stored in a safe environment.

 

Cloud computing offers businesses the opportunity to leverage services that used to cost a fortune and needed to be run in house. This means more time to focus on the things that matter – growing and developing your business.

For more information on using Xero Accounting Software to simplify your business and keep up to date with your finances please contact michael@elitefinance.com.au. or visit www.xero.com.

Government support for small businesses

The Federal Government and the States and Territories are all keen to support the establishment and growth of small businesses in Australia. A robust small business environment has strong flow on effects for the rest of the economy and as such, encouraging investment and training as well as providing grants to budding entrepreneurs are important aspects of government support for small business.

Funding

The difficulty for many small businesses is finding finance to bring their ideas to reality. Many of the best business concepts don’t come to fruition due to the lack of funding available. Fortunately, there are grant programs available through government agencies to support small businesses in finding adequate funds to start up a new business or grow their existing venture. For example, the Repayable Contributions Program offers various avenues of access to funds for small businesses. Some programs take the form of interest-free, unsecured repayable loan, where all or part of the loan is repayable or conditionally repayable depending on the terms and conditions of the contribution agreement. Please see www.grantslink.gov.au for more information on grant programs.

Training Programs

Training assistance programs are another incentive tool that governments have up their sleeves to encourage investment in small business. Some programs provide financial funding to encourage business owners to create long-term employment opportunities, especially with regards to unemployed individuals and post-secondary graduates. Other programs offer wage subsidies to eligible employers in exchange for employers providing job experiences to post-secondary graduates or unemployed individuals.

In addition to money, the government provides a number of programs which offer valuable services and resources. These might include skills training programs, consulting services, mentorship programs, the opportunity to attend trade fairs abroad and introductions to potential suppliers, partners and customers. In many cases, these services would normally bear a substantial cost, so you're not only getting the business building value of the service, but you're saving money, too!

Helpful Government Links

http://www.australiangovernmentgrants.org/programs.php

http://www.ausindustry.gov.au/Pages/AllAusIndustryPrograms.aspx

http://www.grantslink.gov.au/Info.aspx?NodeID=2

http://www.business.gov.au/BusinessTopics/Grantsandassistance/Pages/default.aspx

http://www.digitalbusiness.gov.au/

http://www.accc.gov.au/content/index.phtml/itemId/815214

http://sblegal.innovation.gov.au/

http://www.innovation.gov.au/SmallBusiness/Pages/default.aspx

http://www.smallbiz.nsw.gov.au/

How will the carbon price affect you?

The announcement yesterday by the Gillard government of a $23 a tonne carbon price from July 1, 2012 may mean many things for you and your business. Whilst the tax is targeted toward the 500 or so largest polluters in the nation, the flow on effect in prices may have an impact on your overall financial position.

Families in the lower to middle income range should be, at least initially, compensated through tax cuts and welfare increases. However, for many middle income earning families the tax will have some impact on overall financial position. For example a family with two dependant children earning a combined income of $90,000 a year can expect to be out of pocket by around $120. This increases as taxable income rises. A personal calculator can be found on the Clean Energy Future website which estimates the impact of a carbon tax on you and your family:
https://www.cleanenergyfuture.gov.au/helping-households/household-assistance-estimator/

For small and medium business the carbon tax will also have a real effect on operating costs in the short term. The government has taken the step of increasing the instant asset write-off from $5,000 to $6,500 for purchases after July 1, 2010 which is a step in the right direction. Despite this, there will be increased energy, inventory and other costs passed on that will not be reimbursed by the government. The government has also provided information for small business on their clean energy website:
http://www.cleanenergyfuture.gov.au/helping-business/business-and-a-clean-energy-future/

Every business and individual circumstance will vary and therfore it is important to consult your tax and financial professional for more specific advice.

Please visit our website for more information: http://www.elitefinance.com.au/