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?

Your Ultimate Guide to the Best Skin Care For Men – 4 Secret Ingredients Revealed

Skin care for men is as important as skin care for women. This is a fact that is widely being accepted these days. This article shall give you the clear ideas on what to look out for in men skin care products that is specifically needed for men and their skin care needs.Traditionally, skin care products have always been designed keeping the women and their needs in mind. The creams and lotions had been formulated keeping the women in mind, packaged for women and even had fragrance that was more feminine oriented.Men skin care had been an ignored lot. But, men also need special skin care. Fortunately, some skin care manufacturers have designed products specifically for men. But a majority of them have products that do not differentiate between the special needs of men skin care and women skin care products.Men are more sensitive towards inflammation of skin. Prostaglandin E2 (lipids or fatty cells) is found in greater levels in men then in woman. So, men skin care products should have special ingredients that counter this problem specifically. Inflammation if left unchecked, over time leads to a further breakdown of important structural proteins in the skin and causes premature skin aging.Cynergy TK is a natural ingredient that you must look for in men skin care products. It plays amazing role in soothing skin inflammation by blocking PGE2 production, which is the major biochemical pathway leading to inflammation and redness in the skin.Eyeliss TM and Haloxyl TM are two natural ingredients that work amazingly for dark circles and puffy skin that makes men look much older than they are. They are the best for curing wrinkles beneath the eyes very quickly and effectively. In fact, they are used in the elite creams that are used by the Hollywood stars and supermodels to maintain their young and attractive looks.Although, there are many differences in the skin type of men and women, there are also a couple of similarities. This is because the causes of skin aging are almost the same – whether it is men or women.Both men and women lose collagen in their skin as they age. This makes their skin lose its elasticity and suppleness over time. This also causes wrinkles and fine lines. So, some ingredients are commonly used both for skin care for men products as well as women skin care.Functional keratin is a wonderful solution to this problem of skin aging. It is available in Cynergy TK which is natural ingredient pioneered and developed in New Zealand. It plays a key structural role in skin health and makes it soft, supple, firm and young looking.It is a scientific fact that skin cells require nutrients in the form of vitamins, calcium, minerals and also antioxidants in order to stay healthy and maintain their moisture balance.Phytessence Wakame is an extract of a special Japanese sea kelp that is used in the best skin care for men as well as women products. It is one of the best kept Japanese anti aging and Skin rejuvenation secrets.It is rich in minerals, vitamins, calcium (its calcium content is 15 times greater than milk) and antioxidants. It works like magic in improving skin moisture retention and elasticity. It gives a smooth, velvety, young and radiant skin.Skin care for men has come far from the old days. Now, men do not have to live with wrinkled and saggy skin. They do not have to weather the signs of old age anymore. They can also have a healthy and vibrant skin that only good looking women enjoyed for many years.

Stop Client Dissatisfaction and Grow Your Business

For the past several months we have been surveying advisors about their marketing programs. When we ask them which marketing tools they use, it amazes us that only about 21% use a client newsletter.At a recent conference for financial advisors, we heard from several elite advisors on the subject: One said, “I had an existing client transfer an additional $700,000 IRA account to me after reading an article in my newsletter this spring about the charitable IRA strategy allowed by the Pension Protection Act.”Another said, “We have a top prospect who received our monthly newsletter for almost 18 months before they moved their accounts to us.”We heard from another advisor, “I started with about 100 newsletters a month and now I’m up to over 250. It’s my primary means of marketing. I am averaging over 3 new accounts a month and each new account is over $300,000.”So why don’t you do a newsletter?They don’t work. It’s too hard. I can’t write. I never got around to it. We’ve heard them all. Let’s look at just a couple of reasons why you should make newsletters a core part of your marketing and how you can easily add a newsletter to your marketing without multiplying your staff.1. Clients are dissatisfied.31% of financial advisors believe that their clients are extremely or very dissatisfied with them. 40% of wealthy respondents reported some level of dissatisfaction because their advisor was not proactively maintaining contact and 11% stated that their advisors were difficult to reach.(Phoenix Wealth Management Survey, August 2002, Net worth of $1M+ excluding debt and primary residence; Financial advisors who manage at least $50 million of assets and have 10+ years experience)For advisors intent on improving their showing in this realm, excellent client service appears to begin with a high level of client contact. As a snapshot of the industry standard today, and perhaps an indication of where there is the most room for improvement, nearly half of high net worth investors claimed to be either somewhat or fully dissatisfied with the level of contact they have with their financial advisors. Only 55% of investors stated that they are somewhat or completely satisfied with the amount of contact they have with their primary financial advisors.Satisfied clients hear from their primary financial advisors on average more than 28 times per year, or better than twice per month. This contact can either be in person, over the telephone, or in personal correspondence through the mail or electronically. On the flip side, dissatisfied clients hear from their primary advisors less than 17 times per year.The most telling statistic about the vital importance of client contact is that advisors’ income runs directly parallel with the amount of time they spend speaking or meeting with their clients. Advisors who spend two-thirds of their time with clients have an average income of $160,000 annually. Those who spend between one and two-thirds of their time with clients average $50,000 and those who spend less than one-third of their time with clients average only $30,000.(Tiburon Strategic June 3, 2005)2. Position yourself to KO the competition.Largely due to these rates of dissatisfaction, nearly half of investors have given recent consideration to changing their primary financial advisors. Specifically, 43% of investors responded that they had recently considered a change, whereas 57% stated they had not been considering a change in the near future.(Tiburon June 3, 2005)The landscape is covered with competition. How do you stand out and attract the kind of ideal clients that will make your business thrive? Give the customer what they are looking for. It ain’t rocket science. Clients today are looking for answers. They are smothered with retirement, IRA, estate planning, long-term care planning, college funding and tax issues. This morning your best prospect woke up and wanted an answer to his problems and not a financial product. Give them what they want. You need to be a problem solver. You need to position yourself as the leading expert in your target market. Step One is to tell the audience how you can help them solve their challenges. Isn’t that the point of a good newsletter? It is relevant to the target market in terms of content and it educates them about their financial concerns while demonstrating your expertise in solving those problems. Voila – you are their problem solver.Newsletters made easy.If you are like most financial advisors you have two to three hundred clients in your book. You also know that if you want to make an impression you need to have a consistent process for delivering the newsletter. Finally, you need to make sure the newsletter is getting read, the probability of which you can increase through branding so your clients know the newsletter is from a trusted source. And finally, you need to make a personal connection, so you’d better make sure it’s personally addressed. Oh, did I mention you’ll need to have 3 or 4 articles a month for your newsletter.Before you hit the panic button, there is a solution – BuildYourMarket.com [http://www.buildyourmarket.com] can handle all of this for you. Every month, they create a professionally designed and written 4 color newsletter with content that speaks to boomers and seniors. Each newsletter has a personal message from you addressed to the client or prospect.In case you’re thinking, I’d like to write something about what’s going on in our business, the answer is yes, you can customize as little or as much of the content as you desire.Now what’s your excuse?