Large companies are always some options that they can expect to raise capital for their business. The’ve always have access to a number of alternatives such as the sale of stocks, bonds, bank loans and accounts receivable financing, among others. Looking at the other side of the coin, small business, people have between $ 20,000 and $ 500,000 annual income, which always has the challenge of trying to find the necessary capital to operate the business.
Lack of access to capital has prevented many small businesses grow and take advantage of the many opportunities available to them. It is not uncommon for small businesses to reject the offer and a great opportunity, because they have the capital needed to acquire the necessary resources to meet the bill. However, even small companies have big contracts, they find that they will not pay immediately after the delivery of services. Most of the provisions of the contract that the supplier must provide 30 to 60 days for customers to pay their bills – in effect, forcing suppliers to expand their credit. Lack of sufficient capital resources, including the requirement to offer commercial loans to customers, creating a “perfect storm” that prevents small businesses grow and difficult to exclude all avoid.A problem if the company has direct access to capital. Working capital of the company to add employees and resources to serve new customers and larger contracts. It also improves the ability of companies to spend 30-60 days payment terms to its customers.
In this paper we describe the most common sources of capital and provides an analysis of each source. Each resource can also set score, which summarizes the availability and flexibility of origin. The scoring system evaluates each source of capital given the quality of 1-10. Here are some features to consider when building points: the complexity of the accessibility of small businesses need the flexibility to pay higher scores indicate the source term capital (for example, if it requires significant financial information?) Positive vision of a small number of standard and available to the company. A lower score indicates that a particular source of capital may not be appropriate for the business.
Venture Capital Choice Financial least – Rating: books 1Many and tout the benefits of the availability of venture capital to invest in new operations or existing. Venture capital is an option for small businesses that have a current management team and a very aggressive growth plan, however, venture capitalists rarely invest in small companies that do not intend to go public. The purpose of the venture capitalists who invest in the company for a short time – say five years – and then withdraw funds from the company while gaining significant benefits from their investment. Investors – Rating: 2an angel investor is an individual or group of individuals usually invest in venture capital firms pre-rich. In other words, companies that do not meet the current needs of a venture capitalist, but who can meet your cash flow and management. However, should not be ruled out completely because angel investors angel investment group focused on the development of a specific community and invest in small businesses. The best way to find the nearest group of angel investors is to find on the Internet using a search engine such as Google (). Banks – Rating: small business owners approach their 4.5Most first bank to try to get a line of credit or capital. However, unless the company has been operating for several years, has significant assets and all financial records are correct, your chances of getting at least some funds. The banks, however, can provide a credit facility to a private entrepreneur guarantee. This means that the business owner is personally responsible for the payment of debts. Credit Line can provide businesses with working capital requirements, but can be very risky, especially if the company does not produce the expected results and the owner does not pay the bank. Business owners should use this financing method is very good. Credit Cards – Rating: 5Much bank credit lines, many entrepreneurs use their credit cards to finance their business. Credit cards offer the ability to make purchases or obtain cash advances and pay for it later. Note that a credit card can be a very expensive source of funding. Although the majority of credit card interest rates are low enough to buy, the price could be as high as they were up 17% to 19% due to higher levels of crime. In addition, most credit cards charge 2% -4% of the nominal amount of the down payment as a “fee”. Such as bank lines of credit, personal guarantees of the business owners with credit card payment. Therefore, this method of financing can be very risky if the business does not produce the expected results and the business owner can not pay the credit card company. Business owners should use this financing method is very good. Home Equity Lines of Credit score: Owner 5.5Business owners also have the option to use the capital to fund the continued operation of your business. Loans and home equity lines of credit has many advantages, such as low interest rates and the possibility of having part of the tax cuts. This method of financing gained momentum between 2000 and 2004, when interest rates were at their lowest level in decades and the appreciation of real estate values. The main disadvantage of direct financing methods business owners at risk. In fact, the business goes – at home with opportunities for participation – business to succeed and be able to repay the loan. Such as lines of credit, employers must use this financing method is very good. Small Business Administration – Rating: 7.5The U.S. Small Business Administration ( ) offers a number of very practical choice to invest in commercial transactions. Although many of the services that are not covered in this document SBA, SBA offers the program “microcredit”. The purpose of this program is to encourage and provide micro loans of up to $ 30,000 for small businesses. These loans are usually offered by a financial institution or bank. They have a higher interest rate than traditional loans, but requires greater flexibility, making it more accessible to small business owners. Founders, friends and family – Rating: 7 Friends and family are one of the most traditional forms of small business financing. Many entrepreneurs can not use existing relationships and obtain funding, either as a loan or as a capital investment for your business. Although this source of funding may be more accessible to others, there are some inherent problems. First, employers run the risk of endangering the relationship if things do not go as expected and the business defaults. In addition, transactions are generally with little formality and without a written agreement, which further complicates the matter. If you choose to use this financing option, you should consult with an attorney and get some formal document that outlines the goals and responsibilities of each party. Receivables factoring Rating: 8Accounts factoring, also known as invoice factoring, has become an important source of capital for the company for decades. Now become mainstream and are available in medium and small. Factoring enables companies to sell their receivables to financial institutions defer payment of invoices paid within one or two days. After the sale, invoice finance companies waiting to pay. The main features of the power factor is credit factoring business customers “, as it is an important consideration. To date, receivables financing from the reach of small businesses. However, improvements in technology are turning to alternative methods of financing for small businesses. This means that a small business with little or no credit can experience strong customer, selling your invoices and get funding very quickly. Factoring should be considered as an option for companies that sell products or services to other businesses, rather than consumers.
Conclusion Having capital for your business is one of the most important decisions a business can make. As with all important decisions must be carefully planned and deliberately executed. The old adage that “the best time to find capital when you need it” remains true. You should take the time to explore all the options available to your business immediately, so you can be ready to “hit” a treasure of war when the time is right.
DISCLAIMERThis paper was written to provide small business owners with an overview of the financial options available to your business. However, this article is not intended to provide legal or financial advice since only a qualified professional can do. Commercial Capital LLC and the author is not liable arising from the use of this information on paper. Please consult with a professional before making important decisions about your personal or business finances.