Business financing problems

Bill Gates said he believes that if you show people the problems and you show them the solutions they will be moved to act.  The business world experiences hiccups and even indigestion every day. 

We hear of a financial crunch at the Wall Street, we hear of the collapse of mortgage giants and we hear of the sky rocketing gas prices.  All that we hear, and more, will most probably be problematic to business financing.  Let us, as Bill Gates said, identify these business financing problems and the appropriate solutions before we act.

Financing problems

It is certain to say that most businesses, big or small, will experience problems when financing their activities.  This could be during the beginning or at any stage of the businesses’ life.  Financing being the core of the operations of the business will mean that without it the operations of the company or firm will stall.

Failure to properly manage cash flow is the main problem afflicting businesses.  When a business is unable to tactfully regulate its receivable cash (cash inflow) against its expenses (cash outflow) then a cash flow problem will begin to bite.  The solution to this is simple.  Implement proper accounting procedures to enable the sealing of loopholes that improperly milk the revenue of the business.

Taxes

It is very possible for taxes to take a large chunk of the business’ profits.  In fact, after improper cash flow management, tax is considered to be another problem that affects the financing of businesses.  As much as these must be experienced, the advice of tax consultants on how to structure your business to avoid taxes is welcome. 

Insistence is placed on the word avoidance for any attempt to evade tax is illegal and susceptible to extreme penalties.  Tax regimes vary from jurisdiction to jurisdiction and business owners are advised to acquaint themselves with each before investing.  This may be the only prudent business solution.

Government regulation and compliance requirements

The authorities will always come up with new regulations that usually pose financing problems for businesses.  For example, the insurance industry may be required to raise a certain minimum capital base in order to legally operate.  Such regulations, and the requirement to have business permits and licenses, do not provide financing solutions to businesses.  The considered panacea may be to look out for states and countries with less investment hurdles especially for nascent businesses.

Closely tied to compliance are legal threats.  Prolonged suits equal extreme legal costs and loss of business.  Investing in both developed and developing jurisdictions is facing an increased problem of financing or defending flimsy legalities.  The solution to this problem is not clear.  However, a general research on whether a society is very litigious in relation to a particular industry and the precedents set by local courts may be of help.

Human resource problems

The performance of a business leans greatly on the level of training and experience borne by its employees.  With increased labor mobility, more and more businesses are funding employees who may soon be leaving them.  Retraining or head hunting for replacements causes a lot of strains on the ability of a business to properly operate.

Financing solutions

Although it is not possible to find text book solutions to business financing solutions, increased revenue earnings, better management, research and expansion can be taken into account.  Warren Buffet said "in the business world, the rearview mirror is always clearer than the windshield.”  We reiterate it here.

References

1. Small-Business-Financing-Problems-and-How-to-Solve-Them
2. http://www.brainyquote.com/
3. http://www.businessfundingaz.com
4. http://en.wikipedia.org/wiki/Cash_flow_statement