Wednesday, July 7. 2010Loan to grow a business
I received a question some time back on a matter that applies even today.
Would it be wise to borrow to grow our catering business? Ten years ago, my husband and I took over his mother's catering business. Although the business has been around for 50 years and has built a solid reputation for quality food and exceptional service, we soon realized it needed a lot of improvement. We had to spend most of our savings to build a new kitchen, get a new service vehicle, buy new equipment and utensils, design a new logo, etc. We also had to re-introduce the business to the market because most of its old customers were gone. In this kind of business, we always have to change outdated equipment and design to keep up with the changing trends and keep the competition at bay. Most of our revenues go into these improvements. However, since we only rely on our sales from the bookings that we get, we realize that it will take several more years before we can take our business to a whole new level. We have contemplated on taking out a business loan, at least P1M but kept postponing it because we were too afraid of the monthly amortization. But I think it's about time we did this while we are still young, have the energy and enthusiasm, and while we're still bursting with ideas on how to run this business effectively. I can't wait for another 10 years while we see our competition take off. My reply: Based on the information you gave, it seems that you are in a perfect position to make your business dreams come true. You both have the passion for your food and catering business, a main ingredient in any business. You have started building up your productive assets to support your catering business and you need a process to validate your plan to borrow to grow your business. Borrowing is leverage and properly used, the most powerful tool to build capital and grow a business. Since both of you are still of prime age, you can still be more aggressive as clearly, you can still recover from any mistakes you might make. Your immediate need is to make your actual Financial Statements for your business, that is, Cash Flow, Profit and Loss Statement and Balance Sheet as of the end of the latest month to understand the real condition and the true net worth of your business. I strongly advise that you seek professional assistance to make these financial statements for you. Any prospective lender will require the information from you anyway before they even start evaluating your loan application. After you have established your true financial condition, think out your business plan in detail: what market you will sell to, what product and/or services you will sell and your best estimates as to how much it will cost you to produce and deliver these products and services. The most important projection is your Cash Flow, which provides the true and total amount of cash (capital and debt) required to sustain the profitability of your business. You need to make your monthly projections for the next few years. These must be based on your most realistic set of assumptions pertaining to all aspects of the business requiring cash (cash out) or producing cash (cash in). Make as many projections as you want using different assumptions for each item. These include all the cash that you receive and all the amounts you need to spend for. For each item, use different assumptions. On one sheet, you can have optimistic assumptions. On another sheet, you can use the pessimistic assumptions. Then, choose what assumption in each item is the most realistic and come out with a working financial plan, which will be a combination of all the scenarios you make. Some items can change monthly and some can be the same all throughout. You have to put some thought to each amount you use. The negative amounts in your Net monthly Cash Flow represent the Equity and/or temporary funding (loan) needed by your business during those months. If you see the need for a loan based on your initial projections, your inflows and outflow projections will change with the benefit of the improved operations from your loan and the cash flows related to the loan. Go back and forth with all these changes until you arrive at what in your best judgment truly represents the most likely and conservative outcome. This will determine whether or not you can afford to take out a loan; how much; what payment terms and the interest rate you can absorb. In taking out a loan, the most critical ingredient is your source of repayment and the cost or interest rate of the loan. Note that a loan is a definite and firm obligation for you to repay specific amounts at specific dates in the future. You must pay this obligation whether or not you achieve your business projections. To lower your borrowing rates, you may need to put up some collateral (most likely real estate). As a matter of fact, while the borrowing cost is important, what is more important is that you understand your true financial burden. As a final note, don’t rush into getting any loan until you have determined (from various cash flow projections) the amount of temporary borrowing you will need and the amount of amortization your business can comfortably service on a periodic basis (i.e., monthly quarterly, or even yearly). You must make sure that under the worst conditions, you will have real and sufficient source for repayment. Remember that your business financials should be separate from your personal financial statements. Your business should pay you and your husband a salary. If you are using your home and vehicles for your business, your business should pay you for the use of these assets. This will give you a true picture of what your business profitability really is. Join our July Seminars: July 15 Thursday – 9AM-12NN Investability: The Stock Market Fundamental July 24 Saturday – 2-5PM Pisobilities: Managing Your Personal Finances July 30 Friday – 6-9PM Investability: The Stock Market Technical Analysis Call 6373731 o 6373741 or write info@colaycofoundation.com or check out www.colaycofoundation.com Trackbacks
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thanks for your advice. i'm planning to expand my business and your input would be my guide.
kung ang business nyo sa solid surface countertop ay made of molded resin / granite o marble ay pwede po kayo mag expand to combine with mdf or solid wood kitchen cabinet
mag apply po ako senyo at maraming skills sa middle east na mas gustong bumalik nalang sa pinas at itaguyod ang sariling industriya plus kasama pa namin ang aming pamilya 1.Business plan in detail 2. Actual financial statement of business 3. Source of repayment even in worst condition 2. Interest rate of the loan nag take notes ako baka kaya ko ng magsimula hehehe Speaking of Businesses most of them if not all requires a certain amount of capital but millions of our countrymen could even hardly put up food on the table for family survival depriving them the opportunity to have capital and run a business of their own. So the best immediate remedy is to find and give them the businesses without capital but only a certain amount of their time. Here in this comment of mine let me introduce DNA and invite everybody to do this Big Income Business without capital.
My friend, you are invited to make a fortune! At http://godgiveall.TagEveryCar.com DNA is the real #1 Home Biz ranked by ALEXA! Registration for membership here in DNA is FREE! DNA is a ligitimate company, it has 3 ways of earning money out of different type of products. The main product of DNA is DATA INFORMATION, gathering car/vehicle tags license plates information of all private cars/vehicles you can see all around in all places of all countries worldwide and take note of the time and date and location at the time you have seen the car/vehicle. No hazzle to do the business with incridible 100K Dollars income guarantee per month once you duplicate yourself by the power of ten up to sixth level! DNA will pay you 2 Dollars per 20 car tags reported per month submitted to "TAG ENTRY" database of DNA, plus DNA will pay you 2-Dollars for every monthly tag entry of your downlines and you could easily have unlimited number of downlines X 2-Dollars equals your monthly earnings! DNA will pay you up to tenth level of your downlines! Let's look an easy example below of sixth level only: 100000 10000 1000 100 10 1 ------ 111111 X 2-Dollars ----------- 222,222 Dollars Monthly Earnings! That is why DNA is firm to give you an income guarantee of 100K-Dollars per month if you will only duplicate yourself by 10 and all downline members will do the same to duplicate themselves by 10 up to 6th level! "Life is For Living... Not For Working! Join Our Company For FREE and Discover How You Can Make a LOT of Money So You Can Start Living the Life of Your Dreams Now!" You should take this opportunity and join now for FREE and I will start to help you in developing your team, then I will send you the Step By Step Guide Of Tag Entry Submission. Visit the site now: http://godgiveall.datanetworkaffiliates.com Is this business available in the Philippines. If so, please let me know the best product available here in the Philippines.
Mr. Juanito Memoracion Jr.
With your scheme, one person needs more than 100,000 people as their downline to earn more than 200,000 dollars per month. This means that out of 1 Million people there are 10 people who has the potential to earn 200,000 dollars per month. 10 out of 1 Million is 0.001% (way less than 1%) You are offering us a business that is free but will consume our time and has a 0.001% chance of making 200,000 per month. That's the problem with MLM, they don't show the real picture, they give you numbers and make it look like everyone has a very good chance of earning those numbers. To Mr. Colayco,
I do read some of your books wherein your advocacy is to help people unmask their financial literacy.. if that's the case, why your book is expensive? ordinary people cant buy that. I know what's behind your advocacy- business. I hope you will that kind of attitude.. you act like those celebrities, showing good to the public, but when offerings are revealed, that's the time you could see the real motive- money making. If you are really sincere, you have to make your books available to the public. In China, a hardbound cover book would cost around $.70 to $1.00... So, how come that your book cost around $10.00? Thanks. To Mr. Colayco,
Back again, as i mentioned earlier. I do saw some writers here in the Philippines wherein their advocacy is to help people liberate their minds. Well that's pretty good. But here's the deal, whenever they write financial literacy books, you could highlight it's price/s. Many would buy, but others would doubt the real motives behind the wall. Let's say, those writers could sold around 100,000 books here in the philippines, you price it from P200.00 to P400.00... Then calculate the gross estimated sales. You see, if they are really true to their advocacy, they would provide it at affordable price/s. If people want to know financial literacy, you could surf the net. There are many free downloadable articles you could read and print. That's all... Thank you! China, isn't a good example as piracy and copyright laws there are not as well enforced.
Partly true. But compared to Pinas, it has fewer copyright violations in terms of the volume of fake movies and softwares as you roam its streets even day or night. Western media are puppets of western companies when decrying the piracy in China because they they know they can cash more if it can be totally eliminated considering the population of China and their purchasing power. You go to various cities and counties in China and you'll see Pinas is much worst. But western media are more friendly to us in terms of piracy.
I see your point. I was just trying to convey that price difference between a legitimate publication in the philippines and books in china (possibly non-legitimate)is not a good way to support his/her comment.
I may be wrong but, I have bought books online, in stores, in different countries and from what I have seen-as long as you buy legitimate publication they are priced more or less the same. This is at least true to the type of books I buy. Occasionally you will get to buy cheaper books in the philippines, because certain publishers sells lower cost softbound version available only in that area. there are various ways to be able to read a good book.
1. Public Libraries 2. Trade in books forums 3. Like minded individuals also like to share and borrow books from each other. Also internet rentals and internet access are just as expensive. Allocating a portion of your internet access cash to buy new books might be a good strategy. Following my own monitoring, billions of persons all over the world get the loan at good creditors. Thus, there's good chances to find a consolidation loan in any country.
There have been comments in Mr. Colayco's blogs that are unfair to the other readers who just want to learn and share their experiences.
This is why we ask those who are seriously asking for advice to just write info@colaycofoundation.com so we can reply to them. Mr. Colayco is advised not to comment or reply to rude and unfair comments because the same bloggers will always comment back from their biased point of view. TPG Planholders who need factual explanation can write directly to TPG or to us to forward to TPG to get a factual reply. However, the CFE Team would like to make a few statements. Mr. Colayco and TPG plans are NOT SCAMS. Fact 1: Mr. Colayco was the first to warn the government and the public of the permanent harm that government's SUDDEN change in policy for the pre-need industry in 2004. Fact 2: Appendix E of his book "Making Your Money Work" first published in 2005 explained the situation. Fact 3: While other preneed companies chose to use legal spokespersons, TPG conducted more than 200 townhall meetings to explain the situation to all its planholders. Mr. Colayco was the only one of Pre-need company owners who personally faced their planholders in over 80 of these town hall meetings. This resulted in over 30,000 planholders formally approving by signing Mr. Colayco's proposition to the government. Unfortunately, SEC chose to implement rules suggested by mostly foreign consultants which are not consistent with local economic conditions. In fact, these same rules caused the massive global financial downturn in 2008. Today, while some of these rules have been reversed globally, our own SEC has not done so. The fact the the entire preneed industry has collapsed and effectively has been converted as insurance proves this point. Mr. Colayco continues to openly face the public when objectively discussing preneed plans. Fact 4: Mr. Colayco has a very small ownership in TPG but continues on as non-executive Chairman precisely to advise Management. He continues to look for ways to improve the situation of the planholders, despite the inadvertent effects of the global economic crisis and other legal impediments that the company is subjected to. Fact 5: Mr. Colayco and the CFE Team are teaching all Filipinos on the basic and simplest way of managing their personal finances. This is done with all sincerity and objectivity. Fact 6: All proceeds of books/seminars etc. of the Colayco Foundation for Education do NOT go to Mr. Colayco but only to the upkeep of the Foundation. We will continue to cause to be deleted whatever detrimental comments there may be that will prejudice the public who truly want to learn. FACTS:
People Has Basic Needs; Money is the answer for these needs; People needs work to make money; People needs business to make more money; Money as capital is needed to run a business; PROBLEM: Unemployment / No Work Available; Lots of people are jobless and has no money to run a business; People need extra income; SOLUTION: DNA - Data Network Affiliates is a business which you can start without money; You only need a basic knowledge of computer and computer internet access; It has FREE membership; You need this FREE opportunity! JOIN FREE! THIS WILL BE YOURS INSTANTLY! http://www.tagged.com/dnaffiliates DNA WEBSITE |
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