Economic Perspectives with Hopeton Hay on KAZI 88.7 FM in Austin, TX

Equity – Financial Fitness for Small Business Tips

Posted by Hopeton on December 10, 2010

The purpose of the  Financial Fitness for Small Business Tips is to provide information that will help aspiring and existing small business owners be better prepared to finance the start-up and growth of their businesses in today’s economic environment.  The following tip was provided by Emerson Hall, Community Affairs Specialist for the Federal Deposit Insurance Corporation Dallas Regional Office.  For more information on the financial literacy resources provided by FDIC go to http://www.fdic.gov/consumers/education/.

Simply explained equity is total assets minus total liabilities; to start or obtain financing to expand a business requires the business owner to invest and maintain equity in their business enterprise. It is often said “If I had the money to start a business or expand my business I would not have the need to request financing”. It is also frequently said “You can only obtain financing when you have money with no real need for financing”. Although on the surface these statements appear to be true. They are not accurate.

Starting a business requires commitment, knowledge, experience, tenacity and money. Potential investors and lenders will always inquire about the amount of money the business owner has injected into their business. Money translates into commitment; the more money invested by the owner (risk) the more investors and lenders are willing to seriously to consider providing additional funds to support the business owner.

Moreover, if a potential business owner has not committed to save and invest their funds into their new business; or an existing business owner has neglected to maintain equity in their operating enterprise. It is unlikely that a prudent lender or investor is going to provide funding.

Lenders and Investors must believe that a business owner has complete confidence in their ability to successfully operate their business. And nothing expresses confidence more than a business owner injecting their hard earned cash into their own business concern.

Without owner’s equity there is no viable business concern. This may not be a concept most potential and existing business owners want to embrace, but this is the reality, great ideas are just that, great ideas. Ideas remain ideas until equity is injected to assist in developing and realizing the idea.

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3 Responses to “Equity – Financial Fitness for Small Business Tips”

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  3. […] the original post here: Equity – Financial Fitness for Small Business Tips « Economic … Friday, December 10th, 2010 Uncategorized TAGS: better-prepared, business-tips, businesses, […]

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