What Is the Difference Between Cash Flow and Profits?

What Is the Difference Between Cash Flow and Profits?

There are many financial metrics you want to understand as a business owner. The better you understand what’s going on with your capital, the better equipped you are to nudge your company in the right direction. That way, you can reach your goals and enjoy continued success and growth. Two of the most important financial terms are cash flow and profitability. What do these terms mean?

What Is Cash Flow?

Put simply, your company’s cash flow refers to the capital that is coming in and going out of your monthly ledger. It’s a ratio that determines how much money you’re making versus how much you’re spending. You can check your cash flow at any time of the month to see how much working capital you have available for your needs.

What Are Profits?

Profitability has to do with your overall revenue compared to your expenses. It looks at whether you’re selling enough to cover your costs and have money over and above at the end of the month. The goal is to have a profitable business that always generates more revenue than what’s required to run it.

Why Is Your Cash Flow Important?

If your business has cash flow problems — which is surprisingly common in many industries — it means that you have trouble keeping liquid capital available to use during the month. You may be selling more than enough to cover your expenses in terms of revenue, but that money may not be available at the right time.

For example, imagine a manufacturer that sells $100,000 worth of finished goods. The raw materials cost $25,000. On paper, the manufacturing company is poised to make a huge profit. What happens, though, if the customer who purchased the goods requires three-to-six months to make payment? Even though the sale is already finished and billed, the capital isn’t actually in the manufacturer’s hands yet.

This becomes a big problem if the suppliers require the manufacturer to pay for raw materials in 30 or 60 days. To avoid problems, the company would need an alternative source of financing to cover the cost until the money from the sale comes through.

Which Is More Important: Cash Flow or Profitability?

Both of these financial terms are vital. One without the other is a sign of poor financial health. Fortunately, with financing, it’s possible to balance things out. Investing in your business matters so you can continue growing revenue and profitability, which helps your cash flow.

Abundant Wealth Financial offers cash flow solutions to ensure businesses can cover expenses and build up capital for growth projects. Contact our offices today to learn more.

What Is a Hard Money Loan?

What Is a Hard Money Loan?

Small business financing can be a complex topic. Even when you ignore all the options that do not suit your business or available assets, there are a lot of options to choose from. One of the most popular types of loans is the hard money loan, but many borrowers get confused about what they are because there seem to be so many different products labeled hard money loans.

Hard Money Defined

The short version is that the term means the same thing as the term private loan, but that oversimplifies the issue. If you feel like there are many different types of loans with the hard money label, that is because there are. You have short and long-term options, collateral-backed loans, and many other products available. What makes them all hard money loan subtypes is the kind of backing they have.

Traditional banks and financial institutions work with the Federal Reserve system, which allows them to borrow at extremely low rates and then lend the money out to businesses like yours. As a result, they only need to actually hold a small portion of the loan’s value in cash reserves of their own. Hard money loans from private investors and financing firms, on the other hand, have the financial resources to back their loans. That is what makes them hard money, as opposed to the alternative soft money loans.

Secured Loans From Private Lenders

If you have asset collateral and apply for a secured loan, you can reduce the emphasis on your credit report and the interest you pay at once. Typically, secured loans also provide you with a higher maximum loan balance because the lender’s risk is reduced by the value of the asset. As a result, asset bridge loans and credit lines are very accessible when you deal with hard money lenders. Those are not the only options, either.

Some lenders also offer hard money versions of the commercial mortgage, making it easier to refinance when you need a large sum of capital. You could even use those loans to buy a new property if you have the right down payment in your company’s cash reserves.

Unsecured Hard Money Loans

If you do not have asset collateral and you are not looking for a large loan, there are unsecured loan options for working capital. The costs are high, but approval processes are fast and loan terms are very short. This allows you to access the capital you need when short-notice opportunities arise, provided you have the income to manage repayment. Keep that in mind when your cash flow is tight and a customer wants to place a big order and keep your other loan options in mind for when you do have those assets to refinance.

Abundant Wealth Financial provides hard money loans that feature fast closings and generous terms. Contact our offices today to get the financing you need.


What All Business Owners Should Know About Organizational Culture

Over the last decade, the concept of company culture has dominated countless discussions in boardrooms. Though often used as a way for new management to “shake things up,” changing the culture of your business might actually have a profound impact on daily operations. However, it is vital that you go through the process of revitalizing the atmosphere of your company in the right way. This means that you need to become more organized. A strategy for organizational culture can completely revolutionize the way employees and consumers feel about your brand.

Focus on Problematic Behaviors

Being organized in your approach to changing corporate culture will benefit you in many ways. Instead of seeing a problem and immediately assuming that you need to find a solution, you should dive deeper into the reason for the issue. Why are certain setbacks happening? According to experts in the world of modern business, transforming the behaviors of your team members for the better can have more of an impact than simply attempting to solve problems as they appear. Learning more about problem sources will require effort on your end, but the results will prove essential to your future. 

Build a Team

Another point to keep in mind about organizational culture is that you are not going to be able to oversee all aspects of implementing your strategy. This is where your management team comes into play. Which members of your staff exude leadership qualities? Target these individuals and ask them to be a part of a specialized team aimed at making the transition to the new company culture as easy as possible. People who are trusted by the rest of your staff are likely to see the best results when attempting to make big adjustments.

Use Data 

Changing the culture of a business for the sake of it might seem like a practical idea, but it actually will cause more harm than good if it is not done for a real reason. You might get pushback from employees and many inquiries about why you are doing this in the first place. To provide real insight, back your decisions up with numbers. Tying objectives to planned shifts in corporate culture is one of the more sensible choices available to you, giving you the chance to make your case with data. 

Organizational culture can be a lifesaver when you are trying to make lasting changes to your business operations. Get organized and develop a plan that will breathe new life into the culture surrounding your brand.

Starting Your Own Business: A Step-by-Step Guide

Starting Your Own Business: A Step-by-Step Guide

Starting your own business might sound like an intimidating challenge. However, it doesn’t have to be this way. Launching a startup can be one of the most rewarding experiences that you’ll ever have but it requires a lot of hard work and dedication. This post will go over some things that you should know in order to plan your own venture as an entrepreneur.

Decide What Kind of Business You’ll Be In

Startups come in many forms and there are countless options on the table. You can start a consulting firm, a mobile app development company, a social media company, and so on. The type of business that you choose will depend on many different factors, including your interests and the market for your product. You also have to make sure that the business that you have in mind is not simply a passion project; it should be something that you’re willing to stick with long-term. Once you’ve decided on what kind of business you’ll be in, you will be able to focus more on the industry.

Research Your Market

It’s imperative that you research your market. Thorough research will not only help you choose the right market but it will also help you decide on the right product or service to create. You will want to learn about the needs of your audience and how you can satisfy them. Once you have a better grasp of these factors, you should have a clearer idea of what your business should focus on and how you should market yourself.

Develop a Unique Product or Service

You must make sure that you’re offering something that has real value for your customers. Specifically, you’ll want to think about how you’ll develop your product or service and how you will differentiate it from your competitors. Pay attention to what similar startups are offering. Perhaps a company is selling a product that people are interested in but the product has some issues. This insight can inspire you to make your own product that is better than that of your competitor.

It can be difficult to stay motivated and focused when you’re planning on starting your own business. You might get side-tracked by other things in your life, you might be struggling with financial issues, you might have decision fatigue, and so on. That said, by following these steps, you should be one step closer to launching your own business.

Abundant Wealth Financial offers a wide range of funding solutions for new and small businesses. From startup capital to SBA loans, equipment, lines of credit, real estate, and more, our team will work with you so you can get the financing you need for long-term success.

Is a Line of Credit Within Reach of Your Business?

Is a Line of Credit Within Reach of Your Business?

Lines of credit are like the Holy Grail for small business owners. These financing tools are incredibly powerful, but many people also feel like they’re impossible to find. That said, there are many ways for an owner to qualify if they’re willing to think outside of the box. That can put funding within reach for a variety of business needs.

What Are the Traditional Requirements for a Line of Credit?

Normally, lines of credit follow pretty much the same general requirements as conventional loans. To qualify, your business needs several years of operation, consistent annual revenue, strong cash flow, and an impeccable credit score. This is good news if you have decent credit since you can probably get unsecured credit without issues.

Unfortunately, many small businesses have trouble reaching all of those things. The good news is that there are a few ways to make things easier on yourself. One is to put up collateral. You can secure a line of credit using inventory, real estate, vehicles (sometimes), or equipment. This lowers the other requirements to make getting approved easier.

What Alternatives Does a Small Business Have to Conventional Lines of Credit?

Conventional business credit isn’t the only door open to you. There are several other options depending on your goals and time in business.

One method is to approach a lender about financing from the Small Business Administration. The SBA can help you get a small business loan or line of credit that meets your objectives. You may be able to use the funds to remodel your business, purchase inventory or take care of similar needs. These lines of credit cap out at $5 million, but your total amount depends on revenue.

Another option is business credit cards, which operate similarly to a line of credit and have lower requirements for credit score. The only downside is that any credit card carries a higher interest rate than lines of credit. That means you need to be extra careful with how you spend the money and how you repay it. Still, credit cards can be a great way to balance out your cash flow.

Last but not least is crowdfunding. This relatively new method of obtaining financing isn’t quite like a line of credit, but it can be used to get support for day-to-day activities. If you need to upgrade computer equipment or improve other facets of your business, it’s worth looking into.

Abundant Wealth Financial offers accessible and unsecured lines of credit for new and existing businesses of all types. Contact our offices today to get the funding you need.


How to Apply for a Business Credit Line

How to Apply for a Business Credit Line

Credit lines have been one of the most popular cash flow management tools for companies in the U.S. for decades, and for good reason. They are flexible, they can be used to address any cash flow need that falls within their limit, and with the right assets backing them, they can also be quite inexpensive. If you have never applied for business lines of credit before, there are a few steps to it, but it is not as complex as a loan to purchase an asset. In fact, most credit line approval processes are designed to be easy to navigate.

1. Research Your Lenders

There are a few common requirements for credit lines like your basic business information, proof of insurance, and proof of collateral asset ownership or value. Beyond that, the particulars are unique from one lender to the next. Proper research gives you a chance to compare shop for both interest costs and simplified application processes. Use that opportunity to make the whole proposition easier on yourself.

2. Prepare Your Financial Documentation

Your application package needs to substantiate your income with financial statements in addition to providing information about your location, tax ID, and other important business information. Pull together bank statements, projections, and income statements from your own accounting people to show that you can afford the payments even if the credit line winds up maxed out for some reason. That makes it easy to approve your business.

3. Document Your Collateral’s Value Clearly

The most common asset to use when applying for lines of credit is real estate, and each lender offers a different LTV based on the land value and your credit line. If you do find someone who offers credit against equipment, the same principles apply but you generally do not get as high an account limit. Either way, you need to demonstrate your ownership of the collateral and document any other loans against it or issues that might affect resale if the credit line is foreclosed upon.

4. Be Ready To Communicate

Like many financing application processes, there is a certain amount of back and forth when negotiating lines of credit for small businesses. Often, the approval process is held up because of missed messages or borrowers who do not prioritize fast responses to queries. Be prepared to offer up additional requested information and to confirm approval amounts so you can do your part to get a credit line approval quickly. If you do, you will be surprised at how easy the process can be.

Abundant Wealth Financial offers accessible and flexible lines of credit for new and established businesses. Contact our offices today to get the capital you need.