You need to know these finance terms when it comes to managing your business. It will help you ensure your business has the money it needs to pay employees, vendors and other business-related expenses. The list also includes terms related to loans and getting financing.
Accounts receivable (AR). Money owed to a company from its clients or debtors. The company has performed the service or delivered the product, but it hasn't yet received payment.
Accounts receivables financing. See factoring.
While earnings before interest, taxes, depreciation and amortization (EBITDA) can tell the story of a company's financial performance, it's not another word for cash flow. EBITDA is a great tool for looking at how a company's profitability compares to its competitors and others in its industry because it takes financing and accounting decisions out of the equation.
Here's the formula for EBITDA:
EBITDA = revenue - earnings (excludes taxes, depreciation or amortization)
Lenders use different scoring systems and every scoring system relies on different scales. A credit score -- often referred to as FICO score, named after Fair Isaac & Corporation, the company that created the scoring system -- is a number between 300 and 850.
Most credit scores are above 700. A score over 720 indicates good credit management. By this point, lenders see you as a safe risk putting you in the same category as those with 800.
"A business lives and dies by its cash flow," said Dallas Meggitt, co-owner of Sound & Sea Technology Engineering, in HeraldNet. GDT Well Service, Inc. knew the importance of cash flow. The growing business struggled to nurture it because of the time needed to manage cash flow.
The extraction of shale gas through hydraulic fracturing shows no evidence of water contamination according to a study from the Energy Institute at University of Texas. The university funded the independent study with no involvement from oil and gas companies or environmental organizations.
The pressure of watching cash flow can stress out anyone. Yet, business owners must do it to ensure they can pay employees, vendors and company expenses. Even a profitable business that doesn't have cash flow under control face trouble that could go as far as bankruptcy.
We often talk about what you need to do keep your cash flow balanced to avoid having more cash going out than coming in your business.
Let's change it up and look at ways a business can run out of cash fast:
You have more options for working capital besides a bank line of credit or invoice financing from a private lender. Small businesses tend have fewer costs, making it a challenge to find ways to cut costs. Here are some areas small businesses may not have considered.
We've experienced tough economic times long enough that we need to accept it as normal, permanent or not. This means we need to be strict about all of our expenses and purchases. It also means we need to monitor cash flow.
Signs show small businesses loans from banks are slowly increasing. According to data from Thomson Reuters/PayNet lending index, small business loans have climbed to a three-year high of 18%. Yet, a study from Pepperdine University found that 60% of small businesses failed to get loans.
This list saves you time in muddling through the many oil and gas industry, business and financing resources. Rather than being an all-inclusive list, this provides reliable resources that don't have the garbage you find on some of the spam sites.
What Our Clients Are Saying
- George Del Toro,
We were funded [in 10 days] (the approval process was very smooth). The way I spend my time has changed dramatically since then. I can spend as much time as I need visiting with customers and out on the field... In closing I would like to tell you that Capital Solutions has made it possible for GDT Well Service, Inc. to triple (300%) its business in the last year, without any of the "growing pains".
GDT Well Service
- Brenda and Mark Neufeld,
In our very first conversation I noticed that you not only understood our situation, but also the Oil & Gas trade. Capital Solutions has been an invaluable help... We have grown our business exponentially thanks to you. I can now probably qualify for a traditional line of credit (...but I'm not sure I want to).
B.N.M. Piloting Services
- Keri Gray,
The HUGE difference I found since we are working with you... is in the day-to-day life... Since Capital Solutions is funding us there is no "fear"... when I talk to a vendor or need to make payroll. You guys have also bent over backwards... to make it work for us. I really appreciate that.