As a result of the high unemployment rate over the past several years, many people who previously worked at corporate jobs are now taking to becoming entrepreneurs. While this may seem like a good alternative, they must also consider that there were many functions that the corporation was previously providing that they will now need to provide for themselves. Once of these key functions is the accounting functionality that company provided. Take for example an individual who has always worked in a large corporation, and then decides to build a portfolio of rental properties in order to generate income.
With a small rental property business, the individual will be required by law to file Income Tax forms, and will most likely maintain a log of the daily bookkeeping. This bookkeeping will include information about liability due dates and amounts as well as when rents are due and the amounts. Although this type of bookkeeping may be suitable for the accountant and for day to day operations, if the owner of this small business wants to grow the business, the business will greatly benefit from having additional documented financial information.
In today’s economic environment, the ability to secure loans for capital, such as getting money to purchase additional real estate, or for renovations, traditional bank loans are no longer the only option. Sometimes traditional bank mortgages not even a viable option due to new regulations, like those limiting the amount of mortgages one individual can have to 10.
There are an number other ways that small business can secure funds to grow their businesses. One such form is through the growing popularity of person to person loans. Websites such as http://www.prosper.com/ or https://www.lendingclub.com/ are great examples of person to person loans. Also funds could sought after from other small rental home businesses, or directly from individuals.
When applying for non-traditional type loans, having financial documentation that the lenders are familiar with will help give the borrower a competitive edge over other borrowers. Having the traditional financial statement available will help the lenders to get a better picture of the company’s financial status. The statements these small businesses should be ready to submit would be a Balance Sheet, Income Statement, Statement of Cash Flows, and Statement of Owners Revenue.
When each of these statements is submitted with a loan application for a small business, lenders will be familiar with them. These sites have so many applicants, and lenders want to balance the amount of risk they take with the amount of interest that they make. They will be able to get a complete picture of the businesses financial strengths and the amount of equity that the company holds. Having a prepared set of familiar documentation will be a sure fire way to give the lenders a holistic picture of the small business.
For the small business owner, having knowledge of each of the financial spreadsheets as well as having the data readily available can play a key role in determining the success and growth of their business.