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?

Five Online Business Optimization Strategies

Running an online business gives entrepreneurs an incredible chance to expand and scale their operations. While offline business requires a physical presence — offices, retail outlets, and kiosks in every location — an online business can operate entirely with virtual storefronts and digital real estate. Expanding is simple, and scaling businesses to new heights can be achieved without the need for expensive outlets and physical locations.Still, there are some major errors that newbie online entrepreneurs tend to make when they scale their businesses. From expanding too quickly to moving in all the wrong directions, the road to running a large-scale online business is paved with potential potholes. These five strategies are designed to help you achieve worthwhile business optimization, and take your business to new heights without endless difficulties and setbacks.1. Stick to the 80/20 Principle.
Pareto’s Principle — known as the 80/20 principle — dictates that 80% of your returns — in this case, business profits — will come from just 20% of your actions. Your goal in running an internet business is not to do as much as you can, but to achieve as much as you can. Focus on the ultra-profitable 20% that contributes to your business, and eliminate as much of the fluff as you possibly can.2. Whenever possible, add products to service businesses.
Service businesses are a good short-term model, but as a long-term earning option alone, they are not good. The main issue with service businesses is the lack of scalability and long-term earnings potential. By running a service business, you are essentially tying a value to your time and working to that alone. It is an effective use of your time to create a product, and use your time to amplify its sales. Which leads us into the next strategy.3. Package and sell your information.
Informational products are a major hit, especially in the online world. From guides on mastering online business to simple how-to sets for learning a new skill, informational products make up a huge percentage of online sales. If you have got skills that would otherwise only be valuable in a service business, why not package them into an information product that you can sell online?4. Focus on marketing before you start your business.
The make-or-break component of any online business is that marketing. The internet is crowded, especially for small online businesses, and there is no chance to survive without a large customer or client base that knows how to find you. The world’s most profitable companies invested in marketing before they expanded their businesses, and you should too.5. Set a value for your time, and don’t waste it.
You have set up your online business, invested in some manual and paid marketing presences, and have started to earn over $100 a day. The only problem is that it is taking almost 12 hours to do it. There will be times, especially when running an online business, that you will rack up a reasonably impressive daily earnings total. Ignore it. Daily totals are deceiving and are not an accurate metric for judging online business success.What is much more valuable is the amount of time that goes into that income. Set a minimum value for your time, and create an online business that gives you options on where to spend it. Sometimes services might be worthwhile, other times product-based work might be the best solution. Either way, set a minimum cost for an hour of your time, and design a business that allows you to earn above it.

What Is Nutritional Counseling?

Nutritional counselors, also known as dietitians, help patients identify and manage food and nutrition-related concerns through short- and long-term treatment strategies. Nutritional counseling is commonly applied to patients experiencing neuromuscular or musculoskeletal disorders, digestive ailments, obesity, diabetes, menopause, pregnancy, allergies, among other conditions.By analyzing and assessing diet and exercise habits, nutrition is seen as a key factor in establishing and maintaining a healthy lifestyle. Without adequate nutrition, a large number of diseases can ensue in part due to the vulnerability placed on the body. Nutritional counselors aim to find integrated ways to set goals and help patients achieve them. When nutritional counselors assess patients, individual profiles are analyzed. The information the patient receives from the counselor is contingent on their lifestyle (vegetarianism, for instance), age, life stage (menopause, pregnancy), and medical history.Nutritional Counseling incorporates weight monitoring and education about weight, food records, self-control strategies, meal planning, and problem-solving skills. Instruction of food planning and self monitoring is seen as instrumental in getting patients to follow a specified program.The Work of Dietitians
Dietitians and nutritionists plan nutrition programs, helping to prevent and treat illnesses by promoting healthy eating habits while addressing dietary imbalances. They also recommend specific dietary changes to fit a person’s temporary condition. (Recommending extra folate for pregnant women, for instance.) Dietitians often work in hospitals and schools, applying their services through education and research. Clinical dietitians provide nutritional services to patients in institutions by assessing patients’ nutritional needs, developing and recommending nutrition programs, and evaluating the results with other professionals to coordinate medical and nutritional needs. Community dietitians counsel individuals and groups on nutritional practices aimed to prevent disease and promote health. They work as independent contractors with healthcare facilities or engage in their own private practice, screening clients’ nutritional needs and offering regulated approaches meeting them.Eating Disorders
The American Dietetic Association (ADA) sets guidelines and protocols for the practice of nutritional counseling. In 1996, it defined guidelines for medical nutrition therapy for many medical conditions related to nutrition, which included eating disorders.The American Psychiatric Association (APA) considers nutritional counseling as one of the most important treatment elements for people with eating disorders. Nutritional counseling is viewed for its role in motivating patients to agree to reestablishing healthy eating habits. In this context, nutritional counseling is seen holistically, in terms of how it fits into ongoing support to patients and their families.Nutritional counseling in this context attempts to correct irregular eating habits, replacing it with a balanced approach to food and weight control. It provides a synthesis of information and practices, drawing from many fields including cognitive-behavioral, relational, and educational techniques. It is considered a part of overall treatment, not as a single-source approach. As such, it employs the support of other treatment methods, which can include psychotropic medications and psychological counseling.Collaborative rapport between patient and counselor is considered essential for treatment success. The counselor addressed entrenched food beliefs, behaviors and attitudes revolving around food, how, when, and how much to eat it – amounting to a complex equation. Counseling environments must be secure, safe, and supportive, where the patient receives helpful information from the counselor in a direct but non-intrusive manner.How Nutritional Counseling Can Help Overall Health: Counseling can clarify questions related to nutrients, calories, and special food needs, showing what to look for when reading food labels. They can help sort through healthy cooking alternatives in real-life contexts while teaching strategies of self-control. (One may learn how to better select items from a restaurant menu, for example.)Digestive Problems – Dietitians or Nutritionists jointly work with physicians to establish dietary plans that are in keeping with a patient’s condition. They may recommend the removal of fried foods, spices or carbonation, while recommending other alternatives.Diabetes – Counseling can provide healthy food alternatives without sacrificing taste.Pregnancy – It can help ensure a pregnant woman is getting all the nutrients she needs, especially during the first three months of pregnancy, the crucial period that may affect a newborn’s risk for developing neural tube or spinal cord defects.Conditions that May Benefit from Nutritional Counseling HIV, Cancer, Hypertension, Organ Dysfunctions, Hypoglycemia, and Heart Disease.Most eating disorder centers and residential programs offer nutritional counseling. The benefits of receiving nutritional counseling includes improved ability to concentrate, a boosted immune system, stabilized moods, more energy, aid in recovery of eating disorders, and increase in overall health.