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?

How to Find an Honest SEO International Internet Marketing Company

One of the greatest challenges facing any international business today is being found on the Internet. The Internet has changed the fundamental means for how we conduct international business. It provides instant, real time answers to many of our daily commercial and personal questions. But now that you have a Website, can your site be found when one performs a search on Google, Yahoo, Live.com or AOL for your company’s product or service?Chances are that when another domestic or international business seeks to find your products or services, they will not find you. Most Webmasters deal only with design and layout. They are graphic artists who have learned a little bit of HTML. They copy and paste written copy into a table and upload. They are not expected to be professionals in the art of international Internet marketing nor should they be.The Internet is a big place. An expanding and creative digital universe which demands a variety of professionals in hardware, software, graphics, copy writing, international marketing, domain retailers, operations, finance, journalism, advertising and public relations. But where can we find that magician called an SEO or search engine optimization international marketing professional?We find an avalanche of companies advertising themselves using Google AdWords as SEO international Internet marketing and Web promotion professionals. But sad to say, over 80 percent of these companies know very little about SEO Internet marketing and much about how to take your hard earned money.In May of 2006 the Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) announced that Internet advertising revenues reached a new record of $3.9 billion for the first quarter of 2006. The 2006 first quarter revenues represent a 38 percent increase over Q1 2005 at $2.8 billion and a 6 percent increase over Q4 2005 total at $3.6 billion.Last year, AdWords alone generated $3.4 billion for Google.With the Internet being the place to secure market share, many charlatans and wannabe international Internet marketing professionals are surfacing – thieves who know little more than how to cash your check and disappear quickly.So how does one go about shopping for an honest and successful company which specializes in international marketing and public relations on the Internet?You must ask several questions. Problem is, most companies seeking international SEO Internet marketing support do not know the questions to ask. Leyden Communications (Israel) provides below a list of questions for every company from Tel Aviv, London, Washington and New York, to Paris, Japan, India and China to ask the SEO or international Internet marketing company before they sign a contract.First, if your target audience is New York, London, Manchester or Los Angeles, or any native English speaking market, be certain to hire a native from that country. One whose English is at mother tongue level and understands the marketing culture of your target market. If you do hire an Israeli, make certain that they have lived and worked in your target market locale for at least ten years.Second, you want to know what experience and for how many years they have worked with international marketing, conventional distribution channels, sales, marcom, viral marketing, production of brochures, advertising and public relations?Third, what professional experience do they have in copy writing, journalism and research?Fourth, what practical experience do they have in programming?And last but not least, how long have they been working on the Internet?An international Internet marketing professional must wear many hats to succeed. The Internet SEO must be an experienced international marketing or PR person – one who understands how to penetrate and motivate a market outside of Israel without the Internet. They need to understand the basics of international marketing, branding, distribution and sales channels in order for them to integrate the digital world with the classic print, broadcast media and sales markets. The SEO must be an accomplished, creative and professional writer who can write for both the reader and the search engine.This article is an example of how one writes for both the reader and the Google and Yahoo search engines. The English suffers a bit as the writer finds a fine balance between getting your attention and the eyes of the search engines. But what is more important? The search engine!For if your customers in the UK, France, Germany, Brazil, Japan and South Korea do not find your Website, then having a Website with the best of conventional copy writing will find itself lost in cyberspace.Can you find a Webmaster, Internet graphic design, Internet programmer, professional Internet marketing, international marketing guru and professional journalist and or copywriter all in one person?
Many in Israel will tell you yes. I say, you will be lucky to find a team with each one of these professionals in no more than perhaps three international Internet SEO marketing companies in Israel.What then would be the real acid test for securing a professional SEO – search engine optimization Web promotion marketing company in Israel, New York, London, Paris or Beijing?Simply perform a search on Google for “Israel Internet Marketing” or “Israel International Marketing.”
If the SEO company you are talking to in Israel is not listed in the top ten, you must ask yourself one question: “How can they rank you, without the continued use of an expensive Google AdWords campaign, in a top ten position?”Google AdWords are a very powerful advertising tool used by SEO international Internet marketing companies in Israel, but they are not a substitute for having your commercial Website stand on its own digital legs. AdWords are not a substitute for getting out optimized news stories on Google News and PR news releases in to the many corners of the Net. AdWords do not substitute for creating blogs, professional rooms and forums in Google and Yahoo and the creation of videos for YouTube.Can a native born SEO in Israel find, let alone professionally write the English, French, Spanish or China copy and news you need for your Website and for international blogs and news releases?
Are they fluent in a variety of Israel export and import markets relating to hi tech, food, defense technology, agriculture, biotech, security, real estate, chemicals, metals, gaming, politics, crisis communications, education, plastics, music, shopping, telecommunications, sales, stocks, manpower, diamonds, Judaica, office products, food, beverages, tourism, games, textiles, dating, health, sports, news, videos, clothes, hotels, airlines and rental cars?Allow the native Israel SEO to market your products and services to domestic markets and sales cultures that they know best – Tel Aviv, Ra’anana, Ashdod, Herzlia, Afula, Haifa, Jerusalem, Kiryat Shomona and Eilat.Never look at office size as a measure of success. What you are paying for is knowledge and talent. Many SEO professionals and their complimentary staff of copy writers and programmers may work from a home office in Israel. Again, judge their international Internet marketing success by the ranking of their clients and their own personal search engine optimization ranking on Google and Yahoo.Never pay a maintenance fee. International Internet marketing SEO professionals are not servicing a car or cleaning a house. What you do want to invest in is more Web pages created by their Webmaster and more news stories and or news releases created by their PR firm to be placed on Google News.Never pay all that they ask for up front. Unless you know the company a good policy is paying half before the work begins and the balance once the work is completed. It takes about three weeks to begin seeing the results of SEO or search engine optimization. Although with some Israel SEO, you can see rankings improve within a matter of days by using Alexa.com. In using Alexa.com, it is a tool that you can use, one that cannot be played with by the SEO or SEM company.Lastly, if the SEO international Internet marketing company promises you a first place ranking, you will then know that they are bogus. No SEO or SEM can promise you something for which only Google, Yahoo, MSN and AOL control. They can promise you a higher ranking and depending on the link density of your industry maybe even a top ten position.Remember that the top ten search engine position that we are talking about would not be a paid Google AdWords sponsored link. It is your Web site, your Web pages standing on their own two feet that counts. Also having an optimized news story about your company’s products and services in a top ten position would equal your Website being in a high SEO ranking. In fact, as long as the SEO news / public relations story is in a high position, it reinforces your credibility as it serves as third party endorsement. It is far more potent than your Website ranking, as long as the story has a link to your Website.Your first stop in hiring an international Internet marketing company in Israel is a Google search.
Your second stop is to meet the SEO and SEM – search engine marketing team. If you don’t see a native English speaking, experienced international marketing professional who understands terminology such as POP, embassy commercial attache department, Israel Export Institute, packaging, four color bleed and what an optimized SEO news headline on the Internet looks like – keep walking.

US Markets in green on Friday; Dow 30 up over 345 points, Nasdaq Composite, S&P 500 up nearly 1%

US Markets were trading in the green on Friday with Dow 30 trading at 30,678.80, up by 1.14%. While S&P 500 was trading at 3,701.66, up by 0.98% and Nasdaq Composite 10,690.60 was also up by 0.71 per cent

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US Markets in green on Friday; Dow 30 up over 345 points, Nasdaq Composite, S&P 500 up nearly 1%
Earlier today, Indian stock markets ended the week on a winning note. It was the sixth straight gains for equity markets. Source: Reuters
US Markets were trading in the green on Friday with Dow 30 trading at 30,678.80, up by 345.25 points or1.14 per cent. While S&P 500 was trading at 3,701.66, up by 35.88 points or 0.98 per cent and Nasdaq Composite 10,690.60 was also up 75.75 points or 0.71 per cent. A Reuters report said that today’s strength was on the back of a report which said the Federal Reserve will likely debate on signaling plans for a smaller interest rate hike in December, reversing declines set off by social media firms after Snap Inc’s ad warning.

Source: Comex

Nasdaq Top Gainers and Losers

Source: Nasdaq

Earlier today, Indian stock markets ended the week on a winning note. It was the sixth straight gains for equity markets. The BSE Sensex ended at 59,307.15, up by 104.25 points or 0.18 per cent from the Thursday closing level. Meanwhile, the Nifty50 index closed at 17,590.00, higher by 26.05 points or 0.15 per cent. In the 30-share Sensex, 13 stocks gained while the remaining 17 ended on the losing side. In the 50-stock Nifty50, 21 stocks advanced while 29 declined.