Top 5 implications of personal savings as a source of finance

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Top 5 implications of personal savings as a source of finance

Hopefully, this won't come as too much of a shock, but starting or growing a small business takes money! There are numerous sources of financing you can explore, from your own pockets for fast, short-term financing to bank-approved lines of credit that offer longer term financing.

Of course, there are advantages and disadvantages of short- and long-term sources of finance. You should understand the pros and cons of each option, before you commit to a funding offer.

Advantages and Disadvantages Your personal finances, and the finances of your business partners, are one source of funding. These include not only ready cash on hand in savings and checking accounts, but less liquid finances, such as stock holdings or retirement accounts. Personal financing is often known as bootstrapping and like all sources of financing, bootstrapping has its pros and cons.

On the positive side, using your own cash means there are no strings attached: Personal finance is the fastest and easiest way to secure funding. Conversely, using your own money as a major investment in your business means putting your personal finances at risk.

You could lose your savings entirely and, if you've dipped into your retirement account, you may be putting your future plans at risk, as well. Of course, the same holds true for your business partners.

Bootstrapping can also mean asking those close to you, your family and friends, for financial assistance.

Top 5 implications of personal savings as a source of finance

It's not unusual, for example, for a parent to offer funding to help start up a business venture for their child. These sources also have the advantage of fast access to funds, which might be given as a gift or as a loan.

But there is also the risk of jeopardizing a personal relationship should the business fail and close relatives feel that their money was ill-used. Funds From Investors and Banks Venture capital firms and wealthy individuals -- so-called angel investors -- are another source of financing for starting up a business or expanding a going concern.

Top Liquid Mutual Funds: Better options than savings bank for parking your surplus cash

Here, too, there are pros and cons. Well-heeled investors generally have access to enough funding to finance a large part of your business needs or can cover all of your needs.

It can be a tremendous advantage to have your finances taken care of in one fell swoop, so that you can get back to business. However, finding the right fit for your business and convincing investors to consider your business takes a lot of effort. Additionally, investors that make a large commitment to your business will also expect to have a substantial say in how the business operates and expands.

Your acceptance of investor funding can come with a significant loss of independence when it comes to making major decisions for your business. Bank loans are also a conventional source of business funding. It is generally easier to find and meet with a bank to discuss a loan, than it is to identify potential venture capitalists.Personal Savings are not investment.

If I could scream this from roof tops, I would. There are millions of people who think putting away money in some form is an "investment" and rub their palms in glee thinking of fortunes coming their way.

Top 5 implications of personal savings as a source of finance

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By merging, the companies hope to benefit from the following: Each has certain implications for the companies involved and . Nov 12,  · Pensions and (k) retirement accounts are usually safe under bankruptcy proceedings. Depending on where you live, you may also be allowed to keep a . Long-Term Sources of Finance Long-term financing means capital requirements for a period of more than 5 years to 10, 15, 20 years or maybe more depending on other factors.

Capital expenditures in fixed assets like plant and machinery, land and building etc of a . The personal income tax produces about five times as much revenue as the corporate income tax. Not all income tax taxed in the same way. For example, taxpayers owning stock in a corporation and then selling it at a gain or loss must report it on a special schedule.

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