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?

Importance of Behavioral Targeting in Internet Marketing

The traditional mass approach in marketing is going through a major change, and the strategies and tactics of modern-day marketers are gravitating towards a more dominant presence on the Web. It seems that any product or service needs to have a certain degree of presence on the Web in order to sustain a good performance in the market. If we are going to look at the general orientation of current programs, we will easily discover that a considerable chunk of strategies and tactics are anchored on Web-based applications. This is particularly apparent in display advertising and search engine campaigns, which is so common in a considerable number of products and services.The overall conduct of Internet marketing is even getting more sophisticated as the level of competition has now grown to unimaginable proportions. Internet marketers are now looking at their target market in terms of behavior and demographics.Search marketing is by all intents and purposes a targeting medium. Internet marketers who utilize search marketing are self-driven and are focused in conducting careful and comprehensive assessment that tracks their interests; be it commercial, educational or informational.Seasoned marketers are comfortable in performing contextual targeting. This discipline is being used extensively both in traditional advertising and Internet-based advertising. You can read an interesting article about home gardening and the adverts that are splashed on the pages can be for Roundup or Miracle Grow. The same marketing principle is used in online advertising.Behavioral marketing is an emerging discipline but is catching on at a very fast pace. This is largely due to the capacity of the Internet to capture and document buyer behavior. Seasoned and savvy marketers rely heavily on targeted adverts mainly because they are fully aware that they can effectively reach their clients. With this kind of marketing discipline, businesses are able to reduce their advertising expenses while increasing the level of efficiency of their programs.Within the realm of Internet marketing, our best example for target marketing is search marketing. Through search marketing, businesses are able to adopt strategies such as search engine optimization (SEO), pay-per-click (PPC) and, of late, behavioral and contextual marketing.As marketing thrusts gradually moves from traditional tri-media to online media, the modern-day marketer is setting the tone of marketing variables defined by Internet-based applications. In fact, Internet marketing is considered by a growing number of businesses as the standard of their marketing program.

Take Nutrition to Stay Healthy and Fit

As our lifestyle is getting fast paced along with it our diets are also becoming more fast food based, requirement of nutrition continues to grow. Diet and nutritional products have helped many individuals to maintain their healthy lifestyles by providing essential minerals and vitamins in an otherwise poor diet. Nutritional supplements are an important part of diet for everyone but it is highly essential for runners and for those who exercise vigorously. If you are ill, you are regularly eating fast food or you are dieting, you should be concerned about your proper diet.Nutrition is an important part of diet for everyone because it provides our body with the nutrients which are required to grow stay healthy and work properly. In the year 2005, the United State’s government revised the Dietary Guidelines for Americans and introduced the term “nutrient density.” This term may sound complicated but it simply refers to the exact quantity a food should provide. Nutrient density plays an important role when an overall health and nutrition is considered.According to various experts, the intake of these nutritional supplements may help in preventing heart disease, ward off dementia, fight few cancers and even slow down the aging process. In fact, the outcomes of the best diet supplements are enhanced by appropriate nutrition and regular exercise. It is simply because when people exercise and eat healthy foods, they feel much better, have more energy than ever and thus, becomes less prone to various health problems. Nutrition and health products help in ensuring that sufficient levels of nutrients give your body everything required to stay healthy.In the recent years, dietary supplement industry has experienced sudden growth with items marketed for almost everything from better health to enhancing your sexual libido to anti aging. Yet, when more and more people are purchasing supplement products regularly, many people know very little or nothing about the products they are taking. With the proliferation of new health products available, it is essential for people to learn to select the best nutritional supplement suiting their needs.When selecting a nutritional supplement, one of the first things that you have to figure out is why you want to consume these supplements in the first place. Do you want to prevent yourself from getting sick or you want to boost your immune system? Are you looking forward to improve your sexual performance or perhaps, you wanted to stop your aging signs? Or may be you just want to consume these nutritional supplements to improve your health and prevent diseases in the long run. If you figure out the reasoning for taking the nutrition then you have to find the best nutritional supplement that suits your requirements.As good nutrition is one of the best ways for the body to restore itself to health. Maintaining and restoring nutrition in body not only keeps you fit but also keeps you away from dangerous diseases like Irritable Bowel Syndrome.