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?

10 Facts About Office Business Centers

In today’s economy, office business centers (OBCs) represent a viable alternative to commercial space for established organizations, professionals and entrepreneurs. Here are 10 facts you should consider in evaluating their relevance for your business.1. OBCs help you to focus on your core competency.
In competitive industries, time becomes a valuable commodity, especially for high-level executives. By using an office business center instead of commercial space, you can focus on critical business matters instead of office maintenance and infrastructure.2. By pooling resources, OBC clients can afford cutting-edge technology and services.
OBCs offer a myriad of high-end telecommunications and Internet options too expensive for most small businesses. For example, high bandwidth capacity, fiber optics, VoIP technology, high-speed printers and scanners are readily available. Videoconferencing, also available at most OBCs, can save a fortune in travel expenses.3. OBC clients include nearly every type of business.
Our clients include international organizations and entrepreneurs, as well as professionals such as accountants, lawyers, doctors and financial consultants.4. OBCs provide flexible working arrangements.
OBCs are perfect for flextime, a concept designed to escape the straitjacket of the standard 9-5 work week. OBCs offer virtual support and office space whenever you need it under a wide variety of terms. For international organizations, this includes support staff at nearly any hour.5. OBCs may be used for temporary staff or during office renovations.
Sometimes, your headquarters needs to be refurbished, and the displacement can affect your company’s productivity. OBCs provide office space for any length of time without the commitment of a lease.6. OBCs offer seamless integration with your company headquarters.
At an OBC, you can keep your email domain or main phone number (with new extensions). Through special technology, connection to your clients will be seamless, and customers will be unable to distinguish your OBC office from your main headquarters. OBCs can even incorporate your company’s I.T. security devices to protect your data.7. OBCs help you to learn from your neighbor.
Clients of OBCs can network with other occupants. Best business practices can be improved through this interaction giving clients a substantial advantage over the competition.8. OBCs can be customized for nearly any need.
OBCs let you customize your office instead of trying to fit into a cubic box with a desk and a phone. You can decide how much space to use and change that according to circumstances. You can decide what support structure you need and change that, too.9. OBCs provide office in elegant locations with multiple meeting venues.
OBCs offer a multitude of meeting venues including conference rooms of varying sizes, seminar rooms and auditoriums. Videoconferencing enables virtual meetings, saving both time and money. OBCs are typically located in upscale buildings with attractive grounds and amenities.10. OBCs are particularly valuable when the economy is volatile.
Though a valuable resource at any time, OBCs are particularly in demand during economic recessions or uncertain business environments. The items mentioned above become even more urgent when you are unsure what tomorrow will bring.

Why You Should Rethink About Junk Removal Services

It is time for that renovation, foreclosure, or just getting rid of unnecessary items from your home. You want to take the unwanted items off your hands quickly and efficiently and you feel that you can do it yourself. Well, it is good to be self-sufficient. You get that feeling of satisfaction in doing things yourself. As much as you may consider being able to handle the removal of your junk, there are many factors to consider. So, why not get a free quote on junk removal to start?

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The sorting, packing, lifting, loading up, hauling away and disposal may seem easy, but then doing it practically is complex. If you are going the DIY way, you may end up miscalculating what it entails and how you will get rid of all your junk. This could end up badly for you if your approach and mode of disposal don’t work. You may have your truck, know someone with a truck or have many other reasons to remove your junk; which is okay. However, the benefits of leaving the work to professionals outweigh the reasons for a DIY removal. This is why:

Junk Removal Is Cheaper In The Long Run
When removing junk yourself, with the help of friends, neighbors, or colleagues, you cannot just task them for free. Not only will you spend on feeding them, but you will also give them tokens of appreciation for taking their time. Consider the cost of treating injuries sustained in the process of removing junk yourselves; in addition to extra costs in the disposal and hauling away. While you may think it is cheaper to avoid hiring junk removal services, doing it yourself may cost you more. Medical bills in the event of injury, truck hauling fees, or dumpster rentals could make it end up being a costly undertaking. Most junk services give all-in-one service packages that take care of the junk’s removal, hauling, and disposal.

Convenience For Junk Removal
While you may consider clearing out your space, packing, loading up, and hauling away all by yourself, there is no convenience on your part. Not forgetting the headache that comes with the disposal of bulky junk items. The time spent and the stress that comes with all this could affect you, your work schedule, or your business. In addition, the people helping you get rid of your junk could also be inconvenienced in terms of time. If you consider junk removal services, you will get rid of your junk and enjoy the convenience of it being done for you!

Health Concerns and Safety
If the junk you are removing from your office or home is high in quantity, you may think about letting junk removal services handle it. From the back-breaking work of lifting, cuts, joint sprains, and other injuries, many things could go wrongdoing it yourself. This is because you may lack the expertise to do it right and safely hence getting yourself or others hurt. Furthermore, you may not be aware of the chemical composition of some of the items while handling or disposing of them. To mitigate these possibilities, it is better to let professionals do the work for you.

Efficiency and Reliability
With a DIY junk removal, you may tend to overlook some aspects of hauling away and disposal. After all, it is not just about throwing things in a truck and dumping them anywhere. There are things to consider. Such include what kind of junk can be disposed of in landfills, dumpsters, or waste centers. You may also need to know what items can be recycled, repurposed, or donated. This is too much research and physical input that you could avoid by hiring professionals. Being in the junk business, they can handle your junk efficiently and reliably; saving you all the hassle.

Less Mess
Sometimes, thinking of the stress that comes with junk removal can make you reconsider clearing those useless items lying around. The sorting, loading and disposal process can give you cold feet whenever you consider clearing out your space. You may end up moving them around, hiding some behind walls, or dumping all of them in a room. This could create a messy home or office environment that could additionally be hazardous and attract pests. Having junk services remove it for you will guarantee less mess around your house or office.

Final Thoughts On Junk Removal
Junk removal will give you the peace of mind you need. This is by providing safe, efficient, and environmentally sustainable junk disposal from your home. You will be free from worry about hauling and disposal of junk after clearing out your space. Depending on the kind of A removal company that you are using, your junk will be handled differently. Since most companies aim to minimize waste in landfills, most of the junk in good condition will donate to charity organizations or vulnerable groups in society. However, when hiring a company, you can always ask how they handle the items they haul away. It is better to pick one that uses eco-friendly junk disposal and donation.