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?

Last Minute Travel And How To Find The Best Cheap Travel Deals

Sometimes if time is on your side the very best way to travel is Last Minute Travel. You can often find the very best cheap travel deals this way. Often you can find many such deals to even faraway places like Malaysia or Singapore or even some of your other dream locations. In fact more often than none the faraway places offer the best value for money when it is a last minute travel deal.Reasons Why Last minute travel deals are so good include:-

Because someone else has already paid for an expensive travel deal you can reap the rewards and even grab a bargain, because the travel company has already made their monies. The original buyer has canceled, thus the travel company no longer needs to make such a huge profit on the holiday as they have already made these profits from the original buyer. This is one of the ways you can grab great holidays at bargain prices.
You can often also benefit from holidays in 4 or even 5 star resorts, often at 2 star prices
There is also another very good reason why you would choose last minute travel over regular travel and this is because you can often get great travels deals to those far and away dream locations for small monies, that would usually only pay for a short stop holiday.
You can also usually get lots of extras thrown in for no extra monies like free transfers to and from the airports or even extra baggage allowances.
Disadvantages of Last minute travel include:-

You are limited to which hotels and resorts that you stay at due to the holiday usually being someone else’s booking.
Often the prices don’t include hidden costs including airport transfers and extra luggage costs
The dates are usually restrictive, because the holiday was previously booked for someone else’s timetable; these dates are not negotiable because they are the only ones available for the stated price.
Often the prices are based on 2 or 4 people sharing, Depending on how the original buyer booked their holiday will usually dictate on the board basis. Sometimes the prices stated are based on 2 people or even 4 people sharing and sometimes this can even be 6, however in this case they will usually allow the holiday to be split into 2 groups depending on how the accommodation was originally booked in the first place.
Even though Last Minute travel can sometimes be a little restrictive it can often be a very convenient and very cost effective way of traveling, as you can see above there are some very good reasons why people choose to travel at the very last minute, sometimes even booking the same day of travel. So if you are brave enough and you have a flexible holiday schedule at work or school why not try and book a holiday the last minute travel way and save yourself and your family a small fortune.

Web Site Promotion – Keyword Secrets

What is the secret of finding the right keywords for your web site promotion? The quality of your keyword research will be directly reflected in the quality of your web site promotion. Quality research requires the right tools. The more tools in your web site promotion toolbox,the more information you will access. There is no such thing as too much information when it comes to keywords. The more informed you are about your keywords, the better chance you have to make your web site promotion a successful one.Keyword research is a unique form of market research. It is always dynamic, as are Google and the Internet itself. Keyword research skill should evolve and grow along with Internet marketing skill. It will correlate closely with your success as an Internet Marketer. Every owner of an Internet business should understand the importance of keywords and keyword research to their success.You don’t have to limit your choice of keywords only to a specific business you want to promote on the Internet. Your web site promotion could be a blog about something that interests you, and a subject on which you are knowledgeable. It may be possible to garner enough traffic to produce profitable results from a blog about almost any subject that you are interested enough in to write about. Your writing subject does not have to promote only your business opportunity. There are many examples of profitable blogs and web sites that started from a personal interest or hobby.Where can you find the right tools to research your web site promotion keywords ? A good place to start is with a simple Google search. Take a look at the numbers in the upper right hand corner of the results page from any Google search. This number indicates the total indexed number of web sites that have those keywords on their web site. Even though the number may seem very large, many of the sites just mention the keywords without specifically targeting them.It is important to know where the keywords appear on the site. Sometimes keywords may appear in the URL, (Internet address), in the title, or simply in the text of the page. A search for keywords in web page URL’s would be inurl:keyword where your keywords would substitute for the word “keyword”. A search for intitle:keyword would indicate which web pages used the keyword(s) in the title of the page. A search for intext:keyword would reveal the pages that listed the keyword(s) somewhere on the page in readable or visible text.By the way, one of the most important things on any web site in terms of search engine optimization is to use keywords in the title of the page. Note: search engine optimization or SEO, is the practice of using knowledge of Google to gain a high search engine position or ranking.For much more specific information on traffic volumes for particular keywords, there is a great tool from Google called Google AdWords Keyword tool. This is a free Google service that supplies a wealth of information. You can get a good idea of the traffic for your keywords in the previous month, and the average monthly traffic for the previous year. It also provides a long list of related or additional keywords, and the corresponding traffic levels.Another free tool you can use is the free keyword suggestion tool from Wordtracker. Note: the paid version is even better. This is a very interesting web site promotion tool that gives you a weighted number that indicates the value and level of competition for a particular set of keywords. A number between 75 and 100, or higher, usually indicates that your chosen keywords are good ones. A number closer to zero, indicates less desirable keywords.An additional tool available at no charge is the keyword discovery tool. It gives you one hundred of the best keywords related to your keywords. It claims to look across various search engines to give a broad view of search engine results. There is also a paid version that gives you a twelve month history.There are also various types of software that do keyword research. If you decide to invest in this type of software, it is recommended to find companies that offer a trial version. There are some software programs of this type that are merely marketing tools to sell search engine optimization services. Caveat emptor is the word here. (Buyer beware.)This it just a brief overview or introduction to keyword research. Any web site promotion effort should prioritize thorough keyword research, and recognize it as an essential element of success.