Business Financial Planning

“Financial Products”

By:  Gerald House

Owning a business involves many facets of planning and execution.  On the financial side, there are several areas which should be addressed as soon as possible to protect the assets of the company and its owners.  Of course, your financial plan will not only concentrate on your business’s financial health but layout a proposal to cover any shortfalls which may limit your success in the future.  In addition, a well thought out financial plan can keep you focused on the ultimate goal of building a valuable asset you can either pass along to your heirs or sell to augment your retirement income.  Needless to say, starting early with your financial plan will work to your advantage and seamlessly evolve as your business grows and increases in value.  That being said, a big part of your financial plan is the products that support your plan objectives and ease the financial burden as your business progresses.

One of the first areas in business financial planning is to address your immediate need to protect your assets with the proper insurance coverage.  Remember, you are also an asset to the business—probably the most important asset?  Therefore, both life/health insurance and liability insurance is necessary to operate your business because of the inherent risks we take as small business owners.    You may also want to consider “key man insurance” if there is an employee who’s loss would have a detrimental effect on your business.

Here is a list of insurance products you will need to deal with:

1. Life Insurance
2. Health Insurance
3. Disability Insurance
4. Key Person Insurance
5. Buy-Sell Agreement Funding
6. Commercial Auto, Property, and Liability Insurance

The next area for consideration is a retirement plan for you and your employees.  As a business owner, you must offer the same or similar benefits to employees as you have in-place for yourself.  Therefore, carefully plan your retirement program so it will not be burdensome for you financially.  It is always a good idea to start small and work up to the larger more expensive plans as your business grows.

Retirement programs available to small business owners:

1. Simplified Retirement Plan (SEP)
2. Simple IRA
3. Solo 401K
4. 401K Profit Sharing
5. Defined Benefit Pension
6. Profit Sharing
7. Keogh Plans
8. Self-Directed Retirement Plans

Business loans can also be considered a financial product and should be managed as efficiently as possible to reduce the burden on your cash flow.  There are several loan types on the market but they all come loaded with baggage and should only be considered as a short-term proposition.  The “start-up” business loan is the most common loan product a small business owner will embark upon.  Usually, these types of loans are a necessary evil during the infancy of your business.  On the other hand, business financing is not only the riskiest loan type for lenders, they weigh heavy on the cash-strapped business owner who is struggling during the initial stages of the business life cycle.

Some business loans available to small business owners:

1. SBA Financing
2. Lines of Credit
3. Business Credit Cards
4. Secured Business Financing
5. Personal Loans
6. Home Equity Loans
7. Family Loans
8. Owner Financing
9. Merchant Cash Advance
10. Bank Loans
11. Equipment Leases

All of these financial products will entail some critical monitoring throughout the life cycle of your business.  It is best to review these products on an annual—if not quarterly–basis and make any necessary adjustments to boost your overall financial health.  Remember, these financial products are tools which should augment your goals and objectives set forth in your overall business financial plan.

Gerald House (Business Financial Planner)

Gerald has a diverse background in business management, financing, real estate, real estate appraisal, and construction. He has owned his own construction business, was an independent real estate appraiser, real estate broker, and a partner in a steel fabrication shop. Therefore, he understands the complexity of business ownership. Gerald has consulted with numerous businesses on management and business organization and specializes in business valuations, real estate investment analysis, franchise and business sales, business finance, and business financial planning.  His professionalism has earned the respect of business owners and other real estate professionals. Gerald also consults with real estate investors and is a licensed real estate broker in the states of Georgia and South Carolina.  He holds a Bachelors degree from Augusta State University and a Masters of Business Management from Southern Wesleyan University.