Alternative Financing Vs. Venture Capital: Which Option Is Best for Boosting Working Capital?

There are several potential financing options available to cash-strapped businesses that need a healthy dose of working capital. A bank loan or line of credit is often the first option that owners think of – and for businesses that qualify, this may be the best option.

In today’s uncertain business, economic and regulatory environment, qualifying for a bank loan can be difficult – especially for start-up companies and those that have experienced any type of financial difficulty. Sometimes, owners of businesses that don’t qualify for a bank loan decide that seeking venture capital or bringing on equity investors are other viable options.

But are they really? While there are some potential benefits to bringing venture capital and so-called “angel” investors into your business, there are drawbacks as well. Unfortunately, owners sometimes don’t think about these drawbacks until the ink has dried on a contract with a venture capitalist or angel investor – and it’s too late to back out of the deal.

Different Types of Financing

One problem with bringing in equity investors to help provide a working capital boost is that working capital and equity are really two different types of financing.

Working capital – or the money that is used to pay business expenses incurred during the time lag until cash from sales (or accounts receivable) is collected – is short-term in nature, so it should be financed via a short-term financing tool. Equity, however, should generally be used to finance rapid growth, business expansion, acquisitions or the purchase of long-term assets, which are defined as assets that are repaid over more than one 12-month business cycle.

But the biggest drawback to bringing equity investors into your business is a potential loss of control. When you sell equity (or shares) in your business to venture capitalists or angels, you are giving up a percentage of ownership in your business, and you may be doing so at an inopportune time. With this dilution of ownership most often comes a loss of control over some or all of the most important business decisions that must be made.

Sometimes, owners are enticed to sell equity by the fact that there is little (if any) out-of-pocket expense. Unlike debt financing, you don’t usually pay interest with equity financing. The equity investor gains its return via the ownership stake gained in your business. But the long-term “cost” of selling equity is always much higher than the short-term cost of debt, in terms of both actual cash cost as well as soft costs like the loss of control and stewardship of your company and the potential future value of the ownership shares that are sold.

Alternative Financing Solutions

But what if your business needs working capital and you don’t qualify for a bank loan or line of credit? Alternative financing solutions are often appropriate for injecting working capital into businesses in this situation. Three of the most common types of alternative financing used by such businesses are:

1. Full-Service Factoring – Businesses sell outstanding accounts receivable on an ongoing basis to a commercial finance (or factoring) company at a discount. The factoring company then manages the receivable until it is paid. Factoring is a well-established and accepted method of temporary alternative finance that is especially well-suited for rapidly growing companies and those with customer concentrations.

2. Accounts Receivable (A/R) Financing – A/R financing is an ideal solution for companies that are not yet bankable but have a stable financial condition and a more diverse customer base. Here, the business provides details on all accounts receivable and pledges those assets as collateral. The proceeds of those receivables are sent to a lockbox while the finance company calculates a borrowing base to determine the amount the company can borrow. When the borrower needs money, it makes an advance request and the finance company advances money using a percentage of the accounts receivable.

3. Asset-Based Lending (ABL) – This is a credit facility secured by all of a company’s assets, which may include A/R, equipment and inventory. Unlike with factoring, the business continues to manage and collect its own receivables and submits collateral reports on an ongoing basis to the finance company, which will review and periodically audit the reports.

In addition to providing working capital and enabling owners to maintain business control, alternative financing may provide other benefits as well:

It’s easy to determine the exact cost of financing and obtain an increase.
Professional collateral management can be included depending on the facility type and the lender.
Real-time, online interactive reporting is often available.
It may provide the business with access to more capital.
It’s flexible – financing ebbs and flows with the business’ needs.
It’s important to note that there are some circumstances in which equity is a viable and attractive financing solution. This is especially true in cases of business expansion and acquisition and new product launches – these are capital needs that are not generally well suited to debt financing. However, equity is not usually the appropriate financing solution to solve a working capital problem or help plug a cash-flow gap.

A Precious Commodity

Remember that business equity is a precious commodity that should only be considered under the right circumstances and at the right time. When equity financing is sought, ideally this should be done at a time when the company has good growth prospects and a significant cash need for this growth. Ideally, majority ownership (and thus, absolute control) should remain with the company founder(s).

Alternative financing solutions like factoring, A/R financing and ABL can provide the working capital boost many cash-strapped businesses that don’t qualify for bank financing need – without diluting ownership and possibly giving up business control at an inopportune time for the owner. If and when these companies become bankable later, it’s often an easy transition to a traditional bank line of credit. Your banker may be able to refer you to a commercial finance company that can offer the right type of alternative financing solution for your particular situation.

Taking the time to understand all the different financing options available to your business, and the pros and cons of each, is the best way to make sure you choose the best option for your business. The use of alternative financing can help your company grow without diluting your ownership. After all, it’s your business – shouldn’t you keep as much of it as possible?

The Most Important Five Elements Of Excellent Network Marketing Books

Beginning a Home Based Business using network marketing requires Network Marketing Books. You need good reading material in order to start your new business on the right foot. There are many options from which to choose, and each option often promotes a different strategy as being the best strategy. I wanted to write an article explaining how to make the highest quality Network Marketing Books.These Are My Picks For The Best Things That Should Be Included in Network Marketing Books.The Number One thing is personal branding. Actually, personal branding is the most important thing that should be included in a high quality Network Marketing Book, including the various options available in order for you to brand yourself. Once again, remember that there are many books available for purchase, and many more Network Marketing Companies for you to join. You want to pick the best Network Marketing Books.In order to be successful in Network Marketing, you NEED to comprehend how to brand yourself. In order to get attention from people, you need to stand out from the crowd. People will then see you as being an important resource, a resource which will spark their interest, because they will see your views as a potential new opportunity. Your potential down lines can add a whole new perspective.You need to learn good leadership skills, and how to use them, in order for your team to trust you and respect your knowledge. We will show you a few of the things you will want to teach your team, as well as a few of the other things you can hope to achieve from high quality Network Marketing Books.The Second thing on your list is to evaluate the company and your potential up line. You need to have a strong up line before you can be trusted as a leader for your down line. You won’t be able to learn everything you need to know from books, so you will benefit by joining a strong up line.Your questions about up lining should be answered in a high quality Network Marketing Book. Find your best fit, whether it be a brand new startup company, or a company that has been around for a long time and has a great reputation. Remember that we are discussing Network Marketing. Although the product is important, the most important factor is whether or not you have the potential to become a good networker.Number Three is marketing via YouTube videos and networking via social media sites. SEO will be the next factor to consider. Facebook has millions of people who are logged in at once. A high quality Network Marketing Book should teach you how to create a Facebook fan page and group, plus ways to keep connected with your fans without acting like a pushy sales person. Other social networks include Twitter and MySpace. Since it is a fact that many people have strong social lives online, it is equally important to know how to utilize social media sites.Number Four is a topic I mentioned earlier, and that is SEO, or Search Engine Optimization, which is the method by which you can obtain thousands of free leads. A successful Network Marketer needs to know how SEO works, and be able to implement SEO techniques.It makes sense that a high quality Book would include link building techniques such as Key Word Placement and Key Word Research in order to help you understand your chances at succeeding in getting indexed on the major Search Engines. The general SEO techniques can vary from search engine to search engine, but the basic techniques for Google, MSN or Yahoo are pretty much the same.The Fifth Most Important Thing You Need in A High Quality Network Marketing Book is a good format that will help you manage your time properly. It is always best to know a little about everything in order to be an excellent Networker. When you first begin blogging, it is difficult to ascertain whether or not you are spending too much time blogging. You also need to spend time building links, doing out-sourcing work, building your social networks on Social Media sites, and making your presence known on YouTube. Plus you need to learn basic sales techniques including cold calling, local promotions, Email Campaigns, Google AdSense and Pay Per Click. Plus, aside from marketing techniques, you also need a great team who work well together. A great team can help you to become truly successful.Start with what you know and are good at doing, then learn other Marketing skills so that you will not be confined to one small Niche. Learn a variety of skills. Know how to brand yourself. Study how to be a great leader that your team will respect. A high quality Network Marketing book will offer tips on how to manage your online time.Emails could require 1 or 2 hours per day. Your blog could require at least 3 published blog posts per week. You might want to create 2 YouTube Videos per week. It is best to learn as much as you can in order to be diversified. If you are diversified you will be more skilled at promoting yourself branding.It will help you to learn how to manage your time, marketing and SEO techniques, and, at the very least, offer you general ideas as to how you can brand yourself in your areas of expertise.It is a wise idea to have some great Network Marketing Books available as reference books in your personal library. However, you do not need a book that you will never use. You should make sure that the Network Marketing Books you buy have a minimum of FOUR out of the FIVE factors. I wish you every success.

How to Know If Home Schooling Is Right For You

Have you considered homeschooling your children? Maybe you have but often wondered what you would be getting yourself into if you did. Thousands of parents home school their children every day. It wasn’t an easy decision, there are a lot of things to consider when you home school your child, here are some of the main things that you need to consider.Financial strainOne parent will have to stay home with child while they are schooling them or working part-time, if you are used to living on a two income family there will be some sacrifices made to compensate for this. Also home schooling, while can be done cheaply can also cost more money depending on which program that you use for homeschooling.Time Teaching your children at home will take up most of the day. You will have to have available time to teach, take on field trips and to prepare lessons. There is a lot when you are doing this at home. During the day you will have very little time of your own.Field tripsAfter a while your child may get bored learning at home, and want to have friends to play with, this is a huge part of schooling is having friends to play and socialize with. You will have to make arrangements to take your child out to the park or the library where they can socialize with other children.Household ChoresIt will be hard to keep up with household chores while you are teaching classes. You will have to work on most of this after school hours to complete everything. You will have to be organized not only with the work which is needed to be done around the house, but with the lesson plans and everything else.Your childDoes your child want to go to public school? Are they comfortable being taught by you and willing to learn if you teach them? You want this to be a pleasant experience for them and need for them to learn, if they don’t want to be taught at home it will be a daily struggle for them to learn and have a pleasant experience.Homeschooling can be a great experience with them, many children will continue on to college and do well in college. It’s a huge decision to teach your children at home and make sure that they learn everything which is needed for when they are adults,. It’s not a decision to take lightly.