Business Expenses

Arranging the working capital needs proper analysis of business requirements. The amount of capital needed depends on the size of the business. A rule of thumb is that a businessman should at least arrange for the capital that is equal to the revenue of the first year of business plus the probable expenses that the business can incur.

So if the expected revenue is $125000 in the first year with other expenses amounting to another $175000, then the capital to be arranged for should not be less than $300000. Thus the financial experts of the business should analytically work out the amount of working capital needed for the business to operate without hassles.

Once this is done, an entrepreneur should look for funding avenues that can finance the business. Many financial as well as non-financial institutions offer small business loans. The type of loan opted for has a direct effect on the prospects of the business. Loans are of two types, secured and unsecured. Secured loans extend finance to those who can afford to provide a collateral/ security to the financial institution. On the event of non-repayment, the financial institution gains the right to sell off the security to get their money back. On the contrary, an unsecured loan does not need a collateral but may charge a higher rate of interest from the borrowers.