Calculators for Running Your Business

Check out our new set of financial calculators for business owners:

Business Loan or Line of Credit?

Business lines of credit often have more flexible repayment terms than a standard business loan. Business loan payments are typically fixed over the repayment period, while business lines of credit can offer interest-only payment terms, or outstanding balances can be repaid using a variety of repayment strategies. Companies with uncertain or fluctuating revenue streams, such as startups or seasonal businesses may benefit more from the flexible repayment terms a business line of credit offers.

Purchase or Lease Equipment?

Does it make better sense to buy or lease a new piece of equipment? That depends on several factors, such as the residual value of the equipment you intend to purchase, the amount of money you pay up front as a capitalized cost reduction and the cost of financing. A lease will usually be a more attractive option when compared to an equipment purchase when measured over a comparable term. Keep in mind that with a lease, you will have to return the equipment at the end of the lease term, whereas if you buy, you will own the equipment and will be able to continue driving it after the term expires.

Business Debt Consolidation

Debt consolidation loans allow businesses to transfer the account balances from credit cards, lines of credit or installment loans into a single loan and to make a single monthly payment. For debt consolidation loans to be beneficial, the repayment period for paying off the consolidation loan should be shorter than what it would be for your existing debts without the loan. Secondly, the interest that you pay over the repayment period should be less than what you would pay with your current repayment terms. In some cases, a debt consolidation loan may look attractive because it has a significantly lower monthly payment than what you are paying today, but it is likely the case that the lower payment is due to extending the repayment of the loan over a much longer repayment period.

Saving to Start a Business

Most new businesses get started out of personal savings. The amount of money you will need to start yours depends on the initial outlay of funds you will need to get started, plus the number of months of ongoing expenses you will want to have saved in advance to pay your business expenses before the revenue from your operations can pay for them. Typical startup costs include such things as office furnishings, equipment needed to operate your business and your initial stock of inventory. Once the business is started, you will have continuous expenses that you will incur, such as employee salaries, rent, utilities, and many other costs particular to your business.

Gross Margin Analysis

The gross margin of a product is measured by subtracting the cost of goods sold from the selling price. The cost of goods sold includes all costs associated with producing the goods or services sold by a company. Gross margin percentage is obtained by dividing gross margin by sales revenue. Many companies offer multiple products, so properly understanding overall gross margin is often an exercise in understanding how various unit sales, price points and costs for each product or service contribute to the overall business.

Projecting Your Cash Flow

Even if a business is profitable, it might fail because it is not generating enough cash flow. Money that is tied up in inventory and receivables is not available to help the business pay its bills. You can vary inventory levels, payment terms, and other variables to find the formula that is right for your business to make sure you are generating a positive cash flow.

Ready to Take the Next Step?

Contact SESLOC Business Services at (805) 573-1816 or online to learn more about how we can help your business.