Business owners at the beginning or sometimes in business existence need financing. Many jokes are offered regarding financing offers when you do not need it, but if you need financing to survive that become different stories. Business owners must be able to assess whether they are candidates for traditional or non-traditional financing. Traditional lenders want to grow your business; They don’t want to fix your problem. When business owners must attract additional equity problems usually is that they must submit ownership of a healthy company. So who is this ‘traditional’ lender? This is basically a short list:
Bank and Trust Co
Independent Financing Company
Venture / Private Equity Capitalists
Government
Let’s discuss some of the basics of the traditional player. The bank is the most obvious of all traditional lenders – they focus on assets and guarantees and personal guarantees from the principal. If a company cannot meet their loan criteria, three strikes and you exit the scenario. The venture capital company looks for healthy portions of the company’s equity. They want a big profit for a longer period of time. Generally venture capital transactions are very significant in the size of the dollar. These funders are very professional and have deep bags, often supported by large institutions.
We feel strong that the biggest error company makes when contemplating venture capital is a small size of their transactions, or that funds are being asked for the wrong reasons. Independent financial companies are mostly based on collateral. Rates are usually slightly higher than the level of bank types, and specialization includes leasing and asset-based loans, as well as non-bank working capital settings, commonly called ‘ABL’. Various loans and government grants are available for business borrowers. They have a very good price and a good structure – the main complaint of the borrower is the time to perfect the transaction. Non-traditional lenders: this group can be categorized in 4 categories.
Employees
Friend / family
Personal Third Party Lenders
Supplier
Most business owners do not realize key employees are often a source of capital that has not been utilized. They have personal interests in their work and careers, and often want to be considered for ownership and in a succession scenario. Management purchases are very common strategies and are quite successful. Friends and family are of course a sensitive area – we all know comments that occur around the mixing of friends, family and money. Care is needed in this field.
Most business owners never consider suppliers as a potential form of capital. This group has an interest in your company success – your company is a customer, and they can often see the advantages of a kind of strategic alliance. Even your simple payment restructuring to the main supplier can bring valuable capital to your company. In short, there are various traditional and non-traditional fund sources available for business owners. They are of course not limited in choices, and every business has a unique need and situation that requires a special focus and assessment.
