Continuing Your Business Plan…
In the first part of this blog series, we discussed the elements needed in your business plan to achieve possible small business financing solutions. Specifically, we discussed the needed parts of a business plan in order to be approved for small business loans.
Though you may assume getting business loans is as easy as asking for them, the process is a lot more complex. For example, business loans require a written executive summary, as well as a face-to-face meeting with a representative from an asset-based lending firm. The Commercial Finance Group, is one of these asset-based loan firms, with offices all over California. In 2013, there were over 250,000 small businesses in the Los Angeles area.
Today, that number has increased dramatically and is still suspected to grow. In a metropolis that is home to over three million people, it would make sense that their is such a booming market for small businesses. The Commercial Finance Group (CFG) is here to help you and your business thrive. Most small businesses require a loan to help the business “leave the ground.” Because of this, we have representatives available for in-person meetings with residents who wish to open their own businesses.
Meetings can be nerve-racking, but with preparation, the anxiety can be taken away from the situation. In this blog series, we talked about your executive summary and how it needs to be carried out to be considered successful. Aside from having a business description, an execution plan, and identifying a solution, you also need to inform a lender of your business’ structure, more importantly, how the business will run and how well it is going to function under your plan.
Business and Management Structure
After you go into the details of the history of your business, your employees, etc., you will need to discuss your business’s structure with your lender. By structure, we mean how you wish to run your business. In small business situations, you will need to determine whether you want someone to take up full responsibility for the business, or if you would like to join a partnership
Partnership
A partnership, is when a business is owned by multiple owners — which can be either people or businesses. If a business is split in this way, profits are divided among its owners. Anyone that is claimed as an owner of the business, can report the profits on their tax returns. There are different types of partnerships:
- General Partnership
- Limited Liability Partnerships (LLPs)
- Limited Liability Companies (LLCs)
General Partnerships: General partnerships are when unincorporated businesses are owned and run equally by two or most people. These “general partners” each share responsibility for the business as a whole, such as profits, losses, debts, and management. Part of the reason by some business shy away from this style of management is that responsibilities are difficult to split evenly. Often with general partners it is difficult to divide all the responsibilities so each partner feels like they aren’t overworking. Most of the troubles with business with general partner is that they will often tangle over who is responsible for each portion of the business. However, once an agreement is made and understood, most of the challenge of this management style is solved.
Limited Liability Partnerships:
Limited Liability Partnerships (LLPs) are when an unincorporated business is owned and run by multiple people, all owning and managing the business. These types of partnerships are run with every person that owns the business, shares personal liability for the business’s debts and profits. LLP business are often associated with licensed professionals, such as attorneys and accountants. This typically comes in handy if the business is ever sued. Lawsuits can happen if your business is unable to deliver a product to your customers or an incident occurs while they are on your property; perhaps a customer is hurt on your property and sues your business for their injuries. Having LLP protection will help you keep your business’ doors open while in any legal dispute.
Limited Liability Companies
In this type of business, the structure is a hybrid of two different business management methods. In this business model, a company can be under the ownership of one or more members. These owners can be people or businesses that represent the good of the overall company. There is no limit to the number of members an LLC can have.
In a LLC business structure, the personal assets of each member are protected from the business’s creditors. However, with this, members aren’t personally liable for the actions of the company, which means that the assets of the members, such as their homes, cares, bank accounts, and investments, are protected. This protection is valuable to members so that there is a clear separation between business and their lives.
Sole Proprietorship
A Sole Proprietorship (SP) is reserved for an unincorporated business that is owned by one person. And, because the business is owned by one person, they report all business profits to their individual tax return. Sole proprietorship is the simplest style of business management, as all responsibility is left to one person. However, with sole ownership, comes great risk. For example, if your business falls under difficult times, the owner is solely responsible with correcting the business.
Financial Analysis
For the final part of your business plan, you will need to publish the outlines of your business. Specifically, you’ll want to submit your business’s current monthly or quarterly sales, expense and profits. You will want to also submit your future estimates for business, as a way to entice lenders to your business. When you show your financial analysis, make sure that you make the information clear, readable, and easy to find on the business plan.
The Commercial Financial Group
At the Commercial Finance Group, we are happy to meet with you and discuss your business. In Los Angeles, the market for small businesses is growing, and we believe that your business could be the next great success! We hope that this blog of how to construct your business was helpful. Contact us today and set up an appointment.
