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?

March Nutrition Month

The World Health Organization defines nutrition as “the intake of food considered in relation to the body’s dietary needs.” The significance of nutrition cannot be denied at any cost because it is directly involved with the health and wellness of individuals and overall communities.The science of nutrition not just involves taking in food, but it also involves the process of absorbing, assimilating, utilizing and even excreting the waste out of the body. The importance of nutrition is evident from various scientifically sound and reliable research studies. It has also been proven that people with adequate nutritional status are less prone to diseases as compared to those who have poor nutritional status. It can thus safely be stated that good nutrition is actually a cornerstone of good health, when it is coupled with ongoing physical activity. On the other hand, poor nutrition may lead to decreased immunity towards various diseases, compromised psychological and physical growth and development as well as malfunctioning of the overall metabolism of the body.In order to emphasize the importance of nutrition, the month of March is celebrated as Nutrition Month, especially in the region of North America. However, this is not just limited to North America, rather it is now celebrated in bits and pieces all around the globe. The goal of celebrating March Nutrition Month is to make the masses aware about the importance of nutrition, especially in relation to the maintenance of good health. The time has now come where we have to take steps to designate one particular day in the month of March as the “International Nutrition Day”. This step will be helpful in further emphasizing the value of nutrition in the daily lives of common people and communities generally.March Nutrition Month additionally focuses on the significance of making healthy and informed food choices, as far as the common people are concerned. It is also a way to acknowledge the work of nutritionists and dietitians as they play a very important role in our healthy lifestyles. Every year, a specific theme is assigned to the March Nutrition Month. The theme for the current year 2015 is “Bite into a Healthy Lifestyle” which entails us to lead healthy lives by incorporating wise food and nutrition related choices. Celebrating March Nutrition Month will not make people aware about the importance of nutrition in daily lives but will also help people lead healthy lives.

Kissimmee Florida Hotels Near Disney World

Kissimmee Florida is a well loved tourist destination in the US. It is not just popular because of Florida’s stretch of fascinating beaches; it also has a lot of theme parks and natural landscapes to boast of. Popular attractions in Florida include Disney World, EPCOT, Sea World and Universal Studios among others.When planning on a trip to either Orlando or Kissimmee in Florida, it is best to prepare months in advance and to make the necessary arrangements in the hotel. This is because hotels get fully booked during holiday seasons. Here are some of the finest hotels in Kissimmee Florida that are near the famous Disney World Theme Park:Vacation Village at ParkwayKnown as Oprah favorite resort-hotel, Vacation Village at Parkway is located at 2949 Arabian Nights Boulevard Kissimmee, Florida. Aside from a Disney ticketing booth, this is just a few minutes away from Disney World. The hotel offers handicap facilities, free parking and a 24hr frond desk.Each room at this hotel is equipped with AM/FM alarm clocks, coffee makers, sofa sleepers, air conditioners and kitchenettes among others. Some rooms even have Jacuzzi tubs along with very large TVs, and furnishings. The hotel also has a pool, shuttle services to the major theme parks, restaurants, business center and exercise facilities as well as Wi-Fi, in-room washer and dryers.Other facilities and amenities include a full-sized fridge, large bathroom, cleaning services, free local calls, hair dryers and safe deposit boxes; plus Cable TVs and parking areas.Wyndham Palms Resort and Country ClubThis hotel is situated at 7900 Mystic Dunes Lane Kissimmee, Florida. It is located with more than 600 acres of amazing tropical Florida landscapes. The hotels features a game room, shuttle services to the airport and area attractions as well as bath amenities, banquet facilities, bike rentals, concierge services and Color TVs with VCRs. They also guarantee meeting facilities, parking areas, daily newspaper, express check-out and a fitness facility along with full kitchens, dining areas, whirlpools and game rooms among others.Onsite restaurants include Clubhouse Bar & Grille, The Caddyshack Bar & Grille and Pizza Hut Express. This is the ideal place for social events, gatherings and wedding celebrations.Best Western LakesideThis hotel is situated at 7769 West Irlo Bronson Memorial Highway Kissimmee, Florida. It is just outside Walt Disney World, featuring Mediterranean-styled settings. Set up with 15 2-storey buildings along with 24 tropically landscaped areas, Best Western is really the ideal destination for those who want a taste of the real action in Kissimmee, Florida.This very spacious landscaped hotel assures its guests with a relaxing stay. Aside from Walt Disney World, it is also near various other well-loved theme parks like Universal Studios and Sea World. For those who want to experience the beach, it is just 20-30 minutes away.Amenities and facilities include free parking, a fitness center, babysitting services, 24hr front desk, lounge and bar as well as alarm clocks, coffee makers, a Business Center, express check out and free local calls. They also provide handicap accessible facilities, non-smoking rooms, onsite restaurants, safe deposit boxes and a pool. This is along with their banquet and meeting rooms, modems, hair dryers and very helpful staff.Kissimmee is truly the heart of everything Florida can offer. It is not just a haven for kids but for couples as well. From its many theme parks to luxurious hotel accommodations, Kissimmee can promote lasting memories for the whole family.