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?

Traveling and Touring Through Bude, Cornwall

Another great part of experiencing classic English country towns is going out and traveling and touring through Bude, Cornwall. Sitting on the very topside at the mouth of the Cornwall peninsula, the seaside resort of Bude is a small, quaint town of approximately 9,000 people. It started its life as a harbor town, naturally enough, only later changing to the role it now plays today in Cornwall’s tourist industry.Bude has an interesting history, which included its popular use as a source of sea sand that was collected and then used to stabilize and improve various English moors. In the Victorian Era, it became a well-known stopover, and then a seaside holiday destination for most of the 20th century.The coastal scenery in the Bude area is impressive, indeed. In the 1800s, it was well-known to mariners, who were advised to steer well-clear of it treacherous reefs, which were responsible for causing the foundering of many ships. Geologically, there are cliffs in the region that are estimated to be at least 300 million years old.Bude today, is an attractive town which boasts two wide, sandy beaches that lie close to the town itself. Because of the direction in which the beaches lay (to the west) Atlantic ocean wave action is vigorous enough to attract surfers, which is a site one wouldn’t normally see in an English coastal town.Examples of early English architecture exist in and around the town, with a prime example being that of Saint Olaf’s parish church. Tourism is the main industry nowadays, with Bude Canal and its wharf being an attractive picture-taking opportunity.Cornwall itself is a notable peninsula and county of England in the United Kingdom. It has a population of around 530,000 people, and is one of the six original Celtic nations, which reach back into antiquity. Bude and the surrounding area are sure to please the desire of any tourist for picturesque seaside villages in the English countryside.

Why Wearing Sports Goggles Is a Good Option

These days, you will find that skiers on ski slopes around the world wear ski goggles as protection from the glare and from flying objects that could cause serious injury to the eyes. Many of these ski goggles are made in fashionable designs and trendy colors by manufacturers for skiers to use for both enjoyment and to protect the eyes of people competing in ski competitions. Overall, the key reason for people who wear this type of equipment is to basically protect the eyes from injury and other possible harm.In high speed sports there are also motorcyclists, racing car drivers, drag racers and stock car drivers who also routinely wear safety goggles to ensure their eyes are protected from injury during regular use and while driving in competitive racing. This same situation is evident in horse racing where jockeys wear safety goggles to protect their eyes from flying turf and dirt while riding in races and during routine training and track-work.There are also many other sports where sports people wear safety eyewear and sports goggles to protect the eyes from being damaged in hard-ball type sports such as baseball, hockey and cricket to name just a few. In these sports where the ball can travel at high speed through the air, wearing modern eyewear with frames made of sturdy polycarbonate with lightweight shatter-resistant lenses can be a good choice for most sportspeople. In situations where a sportsperson is required to wear regular glasses because of an eye condition, it may be necessary for you wear prescription safety glasses as a protective measure. In such situations you will need to consult an optician so your sports safety eyewear is fitted with durable lenses and frames.Because of the wide variety of different sports goggles available on the market looking online to find a suitable pair for your particular sport can be a good option. By comparing designs and costs will give you some idea if you decide to buy at a specialty sport store that sells safety sport goggles.If safety eyewear is required for hunting activities it can be a good idea to secure a cord to the side frames to go around the back of the head. By fitting a cord you will be able to avoid having your eyewear accidentally knocked off your head in the darkness by the branch of a tree or some other object.