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?

Mobile And Manufactured Home Loans And Financing For Seniors

I am a Professional Housing Consultant (P.H.C.) certified by the Manufactured Housing Association and have spent many years in the manufactured home industry as a sales representative /sales manager for retail sales centers. Because of my vast experience, I would like to share some financing tips with seniors like myself. Let me begin by going back about ten or fifteen years ago. The
manufactured home industry was booming. There were many finance companies available all of which were competing for your business. They would finance almost anyone at a high interest rate and with little or no down payment. The retailers would take almost anything and show it as a down payment and highly inflate the value. As a result this category of customer would have no investment in their home. To make matters even worse the communities were offering free lot rent for one year or more.Most of us in the industry knew what was going to happen. However, no one knew when
it would happen. It eventually came to pass in the ’90′s…….a large majority of these owners simply walked away and let their homes be repossessed by the finance companiesAs a net result of all these repossessions most of the finance companies either went bankrupt or stopped lending to any mobile or manufactured home owner. Many retailers also went out of business. I happened to work for the largest manufactured home retailer and manufacturer in the world at that time. They also had to file bankruptcy and ended up going out of business.Now let’s talk about the good part of the industry, seniors like you and me!Many of us secured our home investment by either paying cash or putting down a substantial down payment with the result being that most of us are enjoying our investment and our
lifestyles today.However, those unexpected bills or rising costs keep coming in. There are a number of seniors that have had to leave their comfortable homes and go live with their children.
Many have had to give up the activities they like to do. Some have lost a spouse and some income.Let me explain how I handled my situation as unexpected bills came in.FirstI located a finance company that wanted my business.This information is available at my websites listed at the bottom of this article.SecondI borrowed fifty thousand dollars on my home with payments amortized over thirty years with interest only payments for the first seven years.ThirdI paid off all my bills which amounted to about eight thousand dollars.FourthI opened an interest bearing savings account, depositing five thousand dollars. This cash would be readily available for any emergency that arose.FifthI put thirty-seven thousand into a high yield certificate of deposit.Now, for more good news………The finance companies, by law, cannot age discriminate just because you are a senior.I will be one hundred two years old when my mortgage ends.My out pocket expense is
no higher now than it was before I refinanced.You may go to any of my websites while still on line to see if financing or refinancing is right for you. This will direct you to the companies I recommend. There also is an excellent insurance contact on the site. I received three quotes from them and put my car and home owners insurance with the same company and therefore saved a substantial amount of dollars on the home insurance.These websites contain all the information you will need to make a wise decision.Free Finance or Refinance
QuoteFree loan or insurance Quote [http://www.homeowners-choice.com]

Clothing Designs For Women in Wheelchairs

Women who are restricted to wheelchairs often find that their condition can limit the choices of clothing which they can buy. Generally all clothing are made for able bodied people and does not cater for women who use wheelchairs. Clothing that is designed is normally of one size and loose fitting as in one size fits all and style is never looked at. But now slowly designers are looking into this form of clothing and more up to date stylish clothing is emerging with the theme ” women in wheelchairs.”Clothing that designed for people who use wheelchairs is typically designed to accommodate all disabilities, This can be very important for people who suffer lack of motor ability in their hands. Therefore manufactures include velcro seams and buttons therefore making it possible to dress themselves. If you are able to use buttons, however, you may prefer a button-down shirt, but still want it to be designed to look good while you’re in a sitting position and not when your standing as with normal clothing.Clothing designed for women in wheelchairs has dissolved slowly compared to wheelchair designs. WE can buy wheelchairs for any disability, but most wheelchair appropriate clothing designed to accessible to anyone.Now designers are finally catching up with wheelchair fashion and particularly women in wheelchairs. There still are not many sources of fashion clothing for women in wheelchairs but the market is expanding. These designers tend to focus on simply making clothing which looks good and is comfortable while sitting down, which may make them a tempting option for people who work in an office as well.With new wheelchair fashion designers, women in wheelchairs no longer have to feel that they can’t use up-to-date, fashionable clothing which looks and feels good.