Afshin Afsharnejad Explains the Importance of a Financial Education for Entrepreneurs
Afshin Afsharnejad has always been one to balance the books. He started his career as an accountant but has since worked at the top investment advisory firms across London. With a wide career spanning over a decade, Afshin Afsharnejad is an expert when it comes to both launching and financing business operations.
In this interview, Afshin Afsharnejad explains the necessity of financial education for entrepreneurs.
Why is financial education important for entrepreneurs?
Entrepreneurship is based on the commercialization of ideas; this often leads to innovation. However, a crucial component of commercialization is the acquirement of start-up capital. Most schools, however, do not provide finance classes as part of the educational curriculum. Afshin Afsharnejad claims that without this crucial component being taught, entrepreneurs do not possess the correct sets of tools to fully employ their entrepreneurial drive in the pursuit of innovation.
What are the most important take-aways for new entrepreneurs?
Small businesses often require funding. Start-up companies are especially in need of funding. Afshin Afsharnejad says it can be difficult to find that money. The tighter lending standards, as well as venture capitalists still recovering from the recessionary fallout, have created an environment in which funding is difficult to come by. Afshin Afsharnejad believes explains that small businesses have two basic types of financing available: debt financing and equity financing. However, without clear distinctions between the types, it is at times difficult for small business owners to discover the best routes for the commercialization of their ideas.
What can be classified as debt?
The easiest form of financing is debt financing, says Afshin Afsharnejad. The purchase of a home, a car, or the use of a credit card are all forms of debt financing. A loan is something you borrow from a person or business and promise to repay with interest. Debt financing for your business functions similarly. Business owners can seek business loans from banks or receive personal loans from friends, family, and other lenders, all of which must be repaid. Even if family members loan you money for your business, they must charge the minimum central bank interest rate to avoid the gift tax.
There are many advantages to debt financing. You do not have to worry about the lender controlling your business. Once you settle the loan back, your connection with the financier ends. Subsequent, the interest you spend is tax-deductible. Ultimately, it is straightforward to forecast costs because loan amounts do not fluctuate. In my line of business, this is common advice for new entrepreneurs says Afshin Afsharnejad.
What can be classified as an equity investment?
People do not comprehend equity financing as well as debt financing, because equity financing applies to investors. You could deliver shares of your corporation to family, friends, and other little investors, while equity financing often applies to venture capitalists or angel investors. The popular ABC series, “Shark Tank,” emphasizes entrepreneurs who submit their business concepts to a group of investors in an endeavor to ensure equity financing.
According to Afshin Afsharnejad, an increased emphasis on explaining financial concepts such as debt-equity financing to entrepreneurs will allow entrepreneurs to visualize the key important milestones their business must go through to reach success. This will in turn help them to reach their own personal and financial objectives through the success of their business in a time-efficient manner.