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Description of the type of banking and loan arrangements for collection of funds

Description of the type of banking and loan arrangements for collection of funds

In this particular business, the required start-up capital will be at least at least $50,000.  The collection of funds to aid in the launching of the business will require banking and loan arrangements. The arrangements for start-up capital acquisition will entail the development of the expected cash flow analysis as well as the determination of the point at which the business makes a profit. Acquisition of loan from banks being one of the common ways to get the start-up capital, it is important to understand the factors that the bank is expected to evaluate loan application. There are two types of bank loans that are  available which are short-term and long-term. For the start-up capital of this particular business the most appropriate type of bank loan would be a long-term loan (Morris, 2008, p. 241). This is because it takes a long time to mature and therefore can be used to take the business through its cycle.

Monitoring of accounts to ensure accuracy and sufficiency of funds

The bank accounts opened for this particular business would be subjected in order to ensure the accuracy and sufficiency of funds. This monitoring would take place in two broad ways. This includes minimization of the instances for intentional fraud or unintentional errors that could cause harm to the financial status of the business. This would entail the introduction of preventive controls designed to discourage fraud or errors and assist in ensuring accuracy and sufficiency of funds. The other appropriate way would be to come up with detective controls to assist in the identification of fraud or error once it has occurred in any transaction (Mariotti, 2009, p. 139).

Example of how a loan might be constructed to obtain a start-up capital, including computations of payments and interest

The construction of a loan in obtaining required start-up capital for a business involves the consideration of a loan program. This program includes the computation of interest and all other payments. The most popular one is one that can allow a business, to obtain up to $750,000 as start-up capital (Holden, 2007, p. 64).

Inputs for working capital

Annual growth 21% 0% 32% 65% 100%
Target current ratio 2 1 4 6 10
Current assets $20,000 $0 $100 k $1 m $10 m
Current liabilities $8,600,000 $0 $100 k $1 m $10 m

 

Computed outcomes:

Interest 21% of  $8,680,000

The actual current ratio 0, current working capital is -$8,680,000 with a target of $8,700,00

Required working capital increase $17,840,000

Types of taxes to be considered

The following types of taxes will be considered (Barrow, 2011, p. 275):

Payroll taxes: The government introduced it. It includes Medicare and social security taxes at a rate of 17.3%. The social security tax is applicable to the initial $100,800 of the profit, made and the benefits are accrued on initial $100,800 of the income.

Property taxes: These are imposed by the government based on the property market value Property tax is introduced only on realty, using certain jurisdictions tax and other forms of business property. Property tax rates rules and mode of computation vary widely.

Sales taxes: Local authorities and the state impose these ones and they affect the price at retail sale of several goods and services. There is a wide variation about sales tax in various jurisdictions. This ranges from 0% to 16% and is at the time of sales by the seller or may also be remitted by buyers as use tax of the taxable commodities.

customs duties; This are imposed by the government on the importation of various goods with regard to several jurisdictions. The payment of these duties or tariffs must be made before the legal importation of goods. The taxation rates of these duties from 0% to more than 20% depending on the country of origin and particular goods

The United States imposes tariffs or customs duties on the import of many types of goods from many jurisdictions. These tariffs or duties must be paid before the goods can be legally imported. Rates of duty vary from 0% to more than 20%, based on the particular goods and country of origin.

Strategic generation of interest in the business product or service offering

The use of elements such as pricing, commissions, discounts, markups, or markdowns is capable of spelling the difference between success and failure. For this reason, the business intends to use them in a strategic manner to assist in the generation of interest through product or service offering. The business will come up with ideal figures and values with regard to  pricing, commissions, discounts, markups, or markdowns for products and services upon research. This will ensure that the products are services are able to compete effectively with other in the market hence generating interest in the business (Barrow, 2011, p. 243).

Explanation on recovery of cost for purchase of inventory and computers

The acquisition of inventory and computers as some of the initial assets to be purchased according the plan will involve the use of part of the load obtain from the bank to make the purchases. The costs on these purchases will be recovered through employing the concept of depreciation/amortization. The computation of cost recovery for the inventory and computer using the concept of depreciation/amortization will be computed as follows: If the inventory and computers are purchased at inventory and computers and their expected life will be 5 years, then the annual depreciation to aid in the determination of cost recovery will be as follows;

Straight Line Depreciation Method = Cost/Life

487.65 / 5 = 97.53 every year for 5 years would lead to a recovery of $97.53

Use of technology and internet

The use of internet and technology will positively affect the banking and financial aspects of the start-up and operation for this particular business. This is because; there will be increased efficiency with which these operations will be performed. With the wide spread of the internet infrastructure, banking and financial aspects of the business will be accessible to a wide range of customers from various locations. The business will also use technology as a provision of security measures to curb down unnecessary loss (Morris, 2008, p. 186).

Issues and risks associated with processing financial transactions and records on the Internet

There are several issues associated with processing financial transactions and records on the Internet such as the risk of loss of very crucial information and financial data as well as hacking to manipulate the data. The business intends to invest in information and technology experts as well as sophisticated interned security measured to deal with such issues and risks (Mariotti, 2009, p. 106).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

Barrow, C. (2011). Starting a business from home. London: Kogan Page.

Holden, G. (2007). Starting an online business for dummies. Hoboken, N.J: Wiley.

Mariotti, S. (2009). The young entrepreneur’s guide to starting and running a business. New York: Three rivers press.

Morris, M. J. (2008). Starting a successful business: Start up and grow your own company. London: Kogan Page

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