I read an article recently which states that financing may not be the problem for small businesses but it’s the drop in demand. Before the comments section in this blog gets filled with arguments, let me clarify. According to the NFIB survey conducted by Gallup, only 12% of their members cited that the problem they are facing is their inability to find credit while 29% said that bad sales was the problem. Credit is still tight and it will continue to be so until we are fully recovered from the recession. As it stands, it’s not going to be anytime soon.
Equity financing isn’t a loan so you don’t have to worry about repaying it. As long as your business makes a profit, your lenders will be paid. Also the myriad of networks that your lenders are included in may be beneficial to your business as it would increase your credibility and visibility. Like everything else, this type of financing also has some disadvantage and the first one of which is the fact that you won’t have complete ownership of the business so not all decisions would be made by you. If you’re looking for autonomy and control, this type of financing may give you more headaches than others because your lenders would have a say in any business decisions, especially major ones.
However, not all businesses are approved for equity financing because the risk to the potential investor may prove to be too great. So after all the time you have spent networking with various prospective investors, entering contests and what-not, there is still not a guarantee that any investor would gladly give you the money you need.
Debt financing on the other hand is a loan that you need to pay on a fixed term. Sure, it may take you some time to apply for the loan but you might find that this option is preferable especially since you would have complete control over your business, unlike in equity financing. You need to be careful though because over-dependence on your available line of credit may cause you more trouble. Relying too much on your credibility to take out a loan may give you false assumptions that you would still be able to pay up even though your business revenue clearly shows you can’t. If you opt to take out debt financing, you need to ensure that you have the ability to pay your loan back. When the time comes that you need to develop your business by taking out equity financing, investors wouldn’t see you as “high risk”.
Posted by Marie Hernan at 1.8.11
As if taking over search engines and the recent foray into social networking aren’t enough, Google had recently announced that this time, they would also be offering Google AdWords credit cards for small businesses. A partnership between the search engine giant and World Financial Capital Bank now offers a beta version of the new AdWords Business Mastercard. According to reports, World Financial Capital Bank is issuing a no-annual fee card with an 8.99 percent interest rate.
Posted by Marie Hernan at 25.7.11
A company’s financial health is largely determined by its cash flow. If a business owner neglects to effectively manage the movement of money into and out of the business, there’s always the risk that the business will face insolvency. Any factor that affects the liquidity of a company should be carefully tracked and considered so that the business will not fold because of cash flow problems. Entrepreneurs who have been running their business for some time all have strategies to maintain and improve cash flow. For aspiring entrepreneurs and startups, there are lessons you can learn from trodding a well-worn path and here are some tips to help you pave the way for a more efficient cash flow management.
Posted by Marie Hernan at 11.7.11