Thinking About a Small Business Loan?

 

5.  Leverage

Leverage can be interpreted a couple of different ways. In the financial world, leverage is most commonly known as the amount of debt that can be used to finance your business’ assets. In simple terms, the amount of money you borrowed to run your business. You really want to strike a balance between debt and equity. If you have way more debt than equity, you will be considered “highly leveraged” aka “very risky” to potential investors.

6.  Capital Expenditures

Capital expenditures are any items purchased by your business that create future benefits. Basically, if something you bought is going to be useful to your business beyond the year in which you purchased it, capitalize the item as an asset for you accounting records and recognize a portion of the expense (called depreciation or amortization) over the useful like of the capital expenditure. Examples include buildings, equipment, computers, etc.

7.  Concentration

Concentration is usually expressed as a percentage of how much your business is doing with a particular business, client or in a particular area. If your business is concentrated on only one target market and something goes wrong with those limited relationships or areas, the effect on your business could be devastating.

Learn these basic concepts and know them off the top of your head and you will be in a much better position to converse with those interested in knowing about your business!

Related articles:

4 Basic Principles of Raising Capital

Are Hard Money Loans Right For Your Small Business?

The Process of Review is Critical to Success

 

 

 

 

 

 

 

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