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?

All of the Unites States’ fifty states have legalized home schooling, but each state has their own unique guidelines and rules about the entire process of this form of education. Parents who are interested in their children starting homeschooling should first do research about the guidelines and laws that their resident state has. Parents should also do research about the proper steps that need to be followed in order to begin a curriculum.Some research results have stated that children who are taught at home place in the 89 to 90th percent in the national standardized test. This is sometimes one of the reasons that parents choose to home school their children, they want to give them to have the best education possible. Another reason that some parents have said they choose to home school their children are that they can also include religion as a part of their studies and that this helps to strengthen their family bond. Some parents also feel that when their children are taught at home they are safer than they would be at school; this feeling probably intensifies after tragedies of school shootings are reported on the news. When families need a little more flexibility in their lives or just want to really have control over what their children learn may be attracted to the idea of home schooling. When flexibility is desired it is not only about being flexible in regard to time, but can also be about the methods that are used.Parents who are considering schooling at home as an option should locate groups that are in their state. These groups give parents access to a lot of useful information and helps the transition go easier. Parents who are new to the world of homeschooling can help themselves from making the most common mistakes when going through this process by talking to others who are more experienced and have a greater amount of knowledge on the subject. Also, by talking to others and doing research a parent will be better equipped to identify important pieces of information that will help give their child or children the best educational experience possible.There are many different methods of schooling that parents can choose so it is best if parents can make themselves aware of their children’s learning mannerisms. When parents conform to their child’s habits as far as learning goes the process will probably be easier and more effective.Before jumping into the choice to home school all the information should be reviewed including any expenses that are associated with this choice, it might even be necessary to create a budget.

I spoke to a group of parents and children on how to read nutrition labels this weekend and decided it will be good to blog about this for a larger audience. From my experience, even among the educated, ‘Nutrition Literacy’ is far from where it should be and learning to read nutrition labels can be a good starting point.Most of us walk into a grocery store and add items to our basket, blissfully unaware of what nutrition it actually delivers. In fact, many of us hardly ever stop to read the label and even if we do get around to looking at it, we may not be sure what the numbers imply. So here are some pointers which will help you decide if the product falls in the “healthy or not so healthy category” and how often you or your child should consume it.”No Label Don’t Buy ” -check for nutrition label on the food pack you buy. Today, all food manufacturers in the country have to declare the following on a label -nutritional facts per 100 g or 100 ml or per serving of the product:energy value in kcal,
total carbohydrate and sugar,
the amount of protein,
fat in gram (g) or ml, and
vitamins and minerals for which a health claim is made”Match Nutrition information to the quantity you eat”- next check if the nutrition information is given per 100 g or per serving.Net weight grams = grams declared on the nutrition label – the package is a one serve pack, say net weight is 30g and the nutrition label gives information for a serving size, then the numbers you see on the label is the nutrition you get from the pack.Net weight (g or ml) > grams/ml declared on the nutrition label – a good example for this is the fruit drinks/juices segment – nutrition facts are often shown per 100 ml even when a typical serve size is 200 ml. So if you are not alert to this fact, you might assume that your child is consuming only half the calories /sugar!Net weight (g) < grams on nutrition label- The single serve snack packs which we buy frequently for children weigh approximately 30 g while nutrition information is given for 100 g, so we need to do some simple division here else you might be left wondering how a small packet can deliver so many calories!”Stay away from large snack packs” – they weigh more than 100 g, but present nutrition information for 100 g. Unfortunately, current labeling norms do not mandate serving size, and even if they did when was the last time you were able to convince your child to close the packet after eating 15 chips? So, it is wiser to stick to the single serve /smaller packs!”Deciphering the calories further”: What is declared on the pack is the total calories you get from the product. To arrive at the number of calories from fat multiply the amount of fat, given in grams by 9, for carbohydrates and proteins, multiply by 4.”Sugar watch”: The number declared against carbohydrates indicates ‘total carbohydrates’ which includes complex carbohydrates (like what is found in cereals), simple sugars as found in fruit, milk and cane sugar and fibre. Check if the product contains added sugar. Some responsible fruit beverage companies do differentiate between the added sugar and the sugar coming from the fruit but many do not. So, if you are not able to figure out, take a look at the ingredient list on the pack – if the ingredient list includes ‘sugar’ in addition to water and juice concentrate, you can be certain that sugar has been added to make the product.”Fat Facts”: There are good fats and bad fats. But in our country, companies are not required to provide a break-up of the fat in foods unless they make health claims like ‘low fat,’ ‘low cholesterol’. As a result, one can never be sure of the type of fat used in the packaged food. One way to find out is to look at the ingredient list for words like ‘partially hydrogenated fat’ ‘shortening,’ as these products have a higher proportion of bad fats (trans fat). In the absence of any of the above information it might be best to avoid products which are high in fat content.Trust you find these pointers useful. Next time when you go to the grocery store, do look for the nutrition label and ingredient list on pack. If you are not happy with the information given, or after doing the math realise this should not be in your basket, put it right back on the shelf and do yourself and your kids a favour!

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