Financial Discipline: The T in Timing

The T in financial timing is a critical element of business. The T in timing tells business owners what the priorities are when paying expenses. Typically, most employees need to get paid on a weekly, bi-weekly, bi-monthly or monthly basis. And most employees have little, if any, understanding how revenue must be generated in the business to meet payroll. In other words, they don't care about the T in the timing. It is typically financial mechanisms placed in the business to line up the T in timing for revenue with the T in timing for expenses like payroll. This article will explain, KivaZip, Serve from American Express and PRECAPS, three fairly recent financing techniques for "shoe string budget" entrepreneurs.

The Flying Kite wrote "Kiva helps entrepreneurs in the developing world attain simple goals such as buying a new sewing machine or adding a second car to a nascent fleet of cabs. Since its launch in 2005, Kiva has lent over $618,809,175 in 180 countries. How about helping someone in your own backyard rather than (or in addition to) funding a small business across the globe? Enter Kiva Zip, the domestic arm of this global brand and the latest ingredient in Philadelphia's entrepreneurial ecosystem. Kiva Zip launched in 2011 in San Francisco. Using its platform, businesses and startups can campaign to raise small loans (initially capped at $5,000) at zero percent interest. As opposed to Kiva loans, which go through microfinance institutions, Kiva Zip funds go directly from lender to borrower via PayPal (a key partner), free of charge. (Source: www.flyingkitemedia.com/features/kivazip100714.aspx)

"The requirements [for borrowers] are pretty minimal," explains Philadelphia's Kiva Zip Fellow Alyssa Thomas, who works out of the City's Department of Commerce. "We don't check credit. We don't ask for collateral. And we're not taking into account the inherent risk that comes with a lot of small businesses and startups. We are basing loan-worthiness on the character of the business owner." They determine that character in two ways. The first way is through a "trustee," an organization or community influencer that vouches for the borrower, writing a recommendation detailing their relationship and how they think the loan will impact the business. Secondly, every borrower is required to invite people from their own personal network to lend, though it can be as little as $5.

Welcome to Serve from American Express. As a Muslim business owner, it is prohibited for my business to use interest charged for Credit. Credit is a financial transaction to allow people to spend money they don't have. Credit is a way business owners line up the T in timing for expenses like payroll with the T in timing called revenue. My new job is to find away to use financing without the prohibited elements in the most credit transactions called Interest. American Express has always branded itself as a charge card with a net 30 day payment term instead of a traditional "credit card". Therefore I was excited to learn about the Serve, a secured charge card, from a participant in Calling All Female Entrepreneurs. The serve website writes "It's free to register for a prepaid Card online and get it in the mail. Can't wait? Purchase one at your local CVS/pharmacy®, Duane Reade, Family Dollar®, OfficeMax, Office Depot, Sheetz, Walgreens, or Walmart® and then register the Card for an Account online. Register online to get a Card with a name on it and enjoy everything American Express Serve® has to offer. Use Direct Deposit, link your debit card, credit card, or bank account, add checks using a mobile phone and load cash for free across 27,500 CVS/pharmacy®, Family Dollar®, Walmart®, and participating 7'ELEVEN® locations. It can be used to Pay bills, buy groceries, shop online, withdraw cash for free at over 24,000 ATMs, send and receive money between family and friends with Serve Accounts, and use virtually anywhere American Express Cards are accepted. This will be used to record transactions that require a financial "credit" mechanism for Newman Networks and Calling All Female Entrepreneurs.

PRECAPS is a member backed financing program sponsored by FINANTA. The Finanta.org website writes "The PRECAPS program provides access to capital for entrepreneurs who are preparing to borrow and have networks of peers with similar financing needs. Entrepreneurs who are part of a pre-affiliated network of 10 to 15 business owners approach to begin the process of accessing capital, building credit, and improving business skills. Networks are typically informal and may share industry ties, geographic location, or family or cultural connections. During the year, an individual credit action plan will be made to address specific issues during the year. After a group's members are approved, they each receive an individual loan of $1,200 or $3,600, depending on personal and business capacity, to be repaid in 12 months. The goal is to infuse business with capital while enabling owers to establish or improve credit. Business owners also use the workshop space to share experiences and connections and to learn from one another. PRECAPS members complete loan repayment by the end of the year-long cycle. Upon graduation, the PRECAPS group may choose to remain together and enter into additional year-long cycles. Loan amounts increase gradually up to a maximum of $20,000 by Year 5, allowing business owners to continue to build capacity and credit before eventually moving on to traditional financing. (Source: www.finanta.org/business-programs/PRECAPS-program)

Nicole Newman is passionate about seeing businesses grow using technology tools that increase productivity. The digital divide is separating the United States into two communities: technology-savvy and technology-illiterate. With a Temple University bachelor's degree in Management Information Systems, she is armed with solutions.

This article was published on 29 Jan 2015 and has been viewed 849 times
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