Author: onEntrepreneur

IPO (Initial public offering) is the first sale of stock by a company to the public.  An initial public offering is designed to generate capital for a business that decides to take the route of equity financing. Equity financing is when a company uses assets or ownership in the company to get the cash needed for continued growth. Selling stock through an initial public offering is basically selling partial ownership in the company. One downside to this type of financing is that some control over the company is lost when shares are sold to the public. In order to complete a successful IPO,…

Inventory loan uses your inventory to secure a loan. Inventory loan financing (also known as “Flooring”) is the leveraging of inventory using the value of the financed equipment or stock as collateral for the loan. Lenders want to make sure their loans are secure, so this method will improve the chances of getting financed drastically. Inventory loan financing is a method commonly used when a distributor or reseller needs additional credit and payment terms longer than 30 days in order to maintain a complete stock of inventory for immediate customer availability. Lenders and savvy business people realize that running out of…

Intrastate offering enables your business to sell stock within one state. Intrastate offering financing is a very unique method for financing a business. It allows your business to sell stock as long as it only sells to investors within one specific state. Since the securities are only able to be purchased within the state they are issued, companies can avoid SEC registration requirements. An intrastate offering is not within the jurisdiction of the SEC, but it does have to comply with state regulations. If your business is going to proceed with an intrastate offering, it is advised that you consult…

Interim financing is a short-term loan that can become a permanent financing source for your business. This loan is typically made during the production or construction of a project or building. The interim financing loan is replaced with a much larger, long-term type of financing. Interim financing is most commonly utilized in commercial real estate transactions. On average these loans typically are around 3 years, but some can be as short as 6 months, and others as long as 5-year terms. You have some flexibility with the term to choose an option that works best for you. Interest rates for…

Intangible asset is something of value that cannot be physically touched, such as a brand name, franchise, trademark, or patent. There are two basic types of intangible assets. One type of intangible asset is called a legal intangible asset. Legal intangibles include trade secrets such as customer lists, trademarks, patents, and copywrites. Another type of intangible asset is a competitive intangible. A competitive intangible includes basic knowledge activities in a company. Legal intangibles can be defended in a court of law since they are technically considered property. Competetive intangibles cannot be “owned” and, in many cases, cannot be defended in court. They…

Hypothecation is the pledging of securities or other assets to secure a loan without actually transferring possession of the security used as collateral. This is the opposite of modern mortgages where the bank actually takes possession of the home until it is paid off. With hypothecation, if the borrower cannot meet his debt obligations then the lender has the right to seize the collateral and sell it to meet the amount of the outstanding debt. Rehypothecation is when a security is pledged to an institution and later re-pledged by that institution to meet one of its own collateral requirements to a third party.

Hard money is a type of financing where real estate is usually used as collateral. The amount of funds a borrower receives is based on the value of the particular real estate being used as collateral. The rates on a hard money loan are generally much higher than a standard commercial loan and are usually not offered by commercial banks. The cost of borrowing and criteria for lending for hard money loans are very similar to bridge loans. Typical lending guidelines and transactions: $500,000 to $10,000,000 per transaction/same projectUp to 75% loan-to-value improved-marketable structuresCommercial property acquisition, construction, and refinancingBank workouts, bankruptcies…

Government loans from the SBA (Small Business Administration) can be used for most business purposes The purchase of real estate to house the businessConstruction, renovation or leasehold improvementsTo purchase furniture, fixtures, machinery, or equipmentFor the flooring of inventory and for working capital. Government Loans are provided by the government to assist small businesses because they realize that they are the backbone of this country. The SBA (Small Business Administration) is part of the government, and they have programs to help businesses get approved for financing. With one of their programs, they will guarantee part of the loan with the lender,…

Going public is the process of an initial public offering(IPO.) An initial public offering is when a company offers part ownership of the business to the public through the sale of equity, also known as stock.  A company may decide to go public for several reasons. Some include the need for capital, acquisitions, increased company status, or executive payment. Sometimes going public can also be a burden for a business. When the public has part ownership in your company, there is always extreme pressure to perform well in the short term. You also lose some personal benefits as a business owner…

Franchise financing can be a frustrating process without knowing your options. Apart from your local bank, these options fall under 3 main categories: 1. SBA FinancingThe U.S. Small Business Administration (SBA) guarantees loans for private banks/lenders. Programs include the popular 7(a) loan for up to $100,000. 2. Non-SBA and Specialty Franchise FinancingThere are commercial lenders that specialize in franchise financing through equipment leases and structured term loans. There is also the ERSOP program, using your 401k or IRA as start-up capital without penalties, taxes or distributions. 3. The FranchisorMany franchise companies either offer financial assistance themselves or help franchisees finds a…

Forward commitment is a pledge to provide a commercial loan at a future date. A contractual pledge to complete a transaction in the future is known as a forward commitment. The product or goods being sold, the price, the date of payment, and the date of delivery are all specified in a forward commitment. A contractual agreement between two parties to carry out a planned transaction is referred to as a forward commitment. Forwards, futures, and swaps are all examples of forward commitments. A forward contract is a commitment to buy or sell a commodity at a certain price at a…

First round financing is the first investment in a company made by external investors. First-round financing typically follows the startup phase. First-round funding or “venture capital” typically follows seed and early-stage capital that was used to build the business’ full-time management team, develop the business’ first saleable product, and demonstrate that the business is very likely to be profitable.

Factoring invoice allows you to bring tomorrow’s money in today Invoice factoring – or the selling of an accounts receivable invoice to a “factor” benefits your business with the cash flow it needs. Key points of factor invoicing Elimination of bad debt. A non-recourse factor will assume the risk of bad debt, thus eliminating this expense from the business’ income statement.Invoice processing. Factors handle much of the work associated with processing invoices, including posting invoices, depositing checks, entering payments and producing regular computer reports.Unlimited capital. Factoring is the only source of financing that grows with your sales. As sales increase, more money…

Factoring government receivable invoices Factoring government receivable invoices is a fairly common practice to avoid cash flow problems for small, growing businesses. One of the main reasons you should sell your invoices for immediate cash is to eliminate the strain of 30, 60, or 90-day pay delays. You need your money now. 10 simple reasons as to why you should factor government receivable invoices: You obtain an immediate source of working capitalYour sales will increaseYou can expand your business by filling more ordersIt eliminates the risk of credit losses on your customersYou instantly have a professional credit checking and collection…

Factoring account receivable invoices is the best solution for quick payments. Factoring account receivable invoices give your business an advance payment upfront. It is a mode of financing that can help free your business from the cash-flow squeeze caused by slow-paying customers. So How Does it Work?A “factor”, such as ourselves purchases your invoices and immediately advances you most of the invoice amount in cash. The remainder of the invoice amount is retained by us pending collection, minus a small service fee. Ideal CandidatesThis mode of financing works best for small to mid-sized companies that don’t have much collateral yet or start-ups…

External financing: Another source of capital for your business. External financing can take the shape of two different types of financing, debt and equity. Debt financing includes bank loans where a company gets financed by issuing debentures which they have to pay back after a certain period of time. It is called debt financing because the company is in debt to the bondholders and if they were to go bankrupt, the bondholders would have a claim to any remaining assets. In this case, these are secured business loans. Equity financing is when a company decides to give up ownership in…

Export financing: Helping you take your products and business global. Export financing enables businesses to bring their products all over the world. There are a lot of benefits to a business selling overseas, but there can also be a lot of financial risks involved as well. It is important to fully understand the risks and the government regulations before selling overseas. If done right though it can be a very profitable venture, and can sometimes bring a business more profits than selling in the United States. Export financing is loans made for the shipping of products outside a country or…

Expansion financing is capital for business growth. Expansion financing is used for companies that are in a position where they need to expand, or want to expand and they need the extra capital to do so. If the market conditions are right, it can be a great move for a company to expand. Some businesses find themselves in need of expansion financing as soon as possible because of how rapidly their business is growing. Flexible term financing is typically available for a variety of business expenses. These include leasehold improvements, hiring additional staff, new and used equipment, construction costs, marketing costs, real…

Equity loan is typically an “investment” in a company that is secured by a certain amount of that company’s shares and structured, in part or whole, as a loan. Investment banks will provide funds secured by the “equity” or ownership shares of your company. Companies that receive funding are those in large rapidly growing markets, or in niche markets that are not targeted by major players. Investment StageEarly and later-stage companies with a founder and partial management team with revenue or profits and the need for expansion capital. Size of the InvestmentTypically $1-2 million initially with up to $5-10 million over…

Equity participation – Providing an incentive to make a loan. Equity participation gives the lender an incentive to make a loan because they share in the increased equity of the business. If the lender feels that the business has a good model with plenty of potentials, they can have a stake in the company and will see an increase in profits as the company grows. The level of participation can be calculated from a variety of things including gross receipts, net income, or with an EBITDA valuation model. The latter simply means earnings before interest, taxes, depreciation, and amortization. Equity participation…

Equity financing: Selling stock for capital. Equity financing is the act of selling common stock or preferred stock to investors. This is usually done through an underwriter called an investment banker. The company will give up ownership equity in their business and the underwriter will be responsible for promoting and selling them to the public. Another method of equity financing is selling the stock directly to investors without using an underwriter. This is known as a direct public offering and is done to avoid the cost of an underwriter and to avoid having to file the securities with the SEC.…

Equity capital is capital raised from the owners of the company. This is different from debt capital which is money raised by incurring debt through the issuance of debentures and other types of bonds. Owners can choose to sell equity in the company, in the form of stock, to investors. This is usually done through a direct offering to the public or through an underwriter like an investment bank. Equity capital is used to get companies off the ground.

Leaseback financing is a creative way for companies to access capital tied up in owned equipment or property. The business sells the assets to another party, then leases them back for continued use. This converts fixed assets into usable cash. How a Leaseback Works This provides Company A with an immediate $2 million cash infusion while retaining use of the warehouse. Company B earns income from the lease payments. Key Benefits of Leaseback Agreements Considerations For companies rich in fixed assets, leasebacks can be an efficient way to tap into a source of capital while retaining use of revenue-generating property.…

There is traditional and non-traditional way of Equipment loan financing Equipment loan financing through traditional or non-tradition methods rather than leasing can, in some cases, be a more sensible route. Why equipment loan financing is it better than equipment leasing? Low Obsolescence Obsolescence is when something becomes obsolete due to a shift in technology or a change of needs in an industry. Certain equipment is not as threatened by obsolescence as equipment in industries such as technology or medicine. You would need to determine if, through proper maintenance, your equipment would outlast the cost benefits. Equity/Ownership Whether it’s a conventional…

Equipment leasing is a form of financing that more and more businesses are turning to when they are in need of equipment, software, or furniture. The main reason that businesses choose this option is because of all the benefits to it when compared to purchasing the equipment outright. Equipment leasing has more benefits than purchasing outright. Equipment leasing payments are almost always tax-deductible. It is important that you consult with a respected accountant so you know exactly what can be deducted. Most of the time a business can deduct the monthly payment completely. When compared to an outright purchase only the…

Equipment lease financing as opposed to purchase financing is gaining more and more popularity due to its many advantages. Advantages of equipment lease financing: 1. No Down Payment With leasing, there is typically no down payment required. You can finance 100% of the cost; in fact, you can finance more than the cost of the equipment. Additional expenses such as taxes, installation, delivery, and maintenance can usually be added to the lease. 2. The Tax Benefit Lease payments, in many cases, are 100% tax-deductible. Bank-financed equipment must be depreciated over a longer period of years, and only the interest portion of…

Divestiture is the outright sale of company assets, such as ownership sale to employees, sale of large blocks of stock, or an orderly liquidation. Divestiture is most often due to an asset’s poor contribution to the company. If an asset is not important to the core of a business or if it is worth more to a buyer as a separate unit than it is worth with the company, the company may decide to divest the asset.

Discount loan is a loan on which the interest and financing charges are deducted from the face amount when the loan is closed. The borrower only receives the principal after the financing charges and interest are taken out but must repay the full amount of the loan. For example: If you close a loan for the amount of 50,000. If the interest and financing charges were 10,000, you would receive 40,000 from the lender, but still, have to pay back the whole 50,000. This is primarily used for short-term loans.

DPO or Direct Public Offering is an offering in which the company shares of stock are sold directly to investors, rather than through an underwriter. Using a DPO, the company can eliminate the cost associated with underwriters. It also eliminates the need to file the securities with the Securities Exchange Commission which can take a significant amount of time. Direct Public Offerings are a type of equity financing that is an alternative to debt financing. Instead of taking on debt by issuing debentures and other types of bonds to investors, a company can use the equity in the company to generate capital. One…

Public offering is the making available of a new securities issue to the general public. The idea behind a public offering is to raise money for your corporation. There are several rules and regulations you need to comply with in order to have a public offering. Normally there is an investment bank that acts as the underwriter for the stocks sold to the public. There are two main types of public offerings, debt and equity financing. Equity financing is when a company uses assets or ownership in the company to get the cash needed for continued growth. Selling stock through an initial…

Direct placement is an equity offering without an underwriter which is usually exempt from SEC filing. This is when a company decides to raise funds by selling ownership in the company rather than debt financing with debentures and other things. Typically companies chose to issue their securities to the public using an underwriter like an investment bank. A direct placement takes out the middle man and allows a company to offer its securities directly to the public. This type of placement also eliminates the timely process of filing the securities with the Securities Exchange Commission. The first place many businesses turn…

Direct financing is financing done without the use of an underwriter or broker. In the situation of direct financing, the securities are sold directly to investors in order to avoid the cost of underwriting. Underwriters are usually investment banks who hype up the stock for the initial public offering. Direct financing without the use of underwriters is also SEC exempt in most cases. That eliminates the need to file securities with the SEC.

Development financing with the SBA 504 loan program. This program provides you with long-term, fixed-rate financing for major fixed assets (land, buildings, etc.). This program is set up to contribute to the economic development of a community. The SBA through Certified Development Companies (CDC) works with private-sector lenders to provide financing to small businesses. These programs include a loan from a private-sector lender that covers 50% percent of the project and a secondary loan for up to 40% of the project cost from the CDC that is 100% SBA-guaranteed. This will leave you with a combined loan-to-value ratio of 90%.…

Debt offering is a debt instrument offered for purchase by private investors – normally with warrants for future stock purchases at fixed prices. This is a way for companies to raise debt financing by selling notes with a set annual return rate and a schedule on when the full payment will be made to investors. This is very similar to a private business loan. Using a debt offering, a company can avoid giving up ownership or future profit in the business. Debt financing is a direct contrast to equity financing where companies sell an ownership stake in the company to raise funds. Equity…

Debt financing is financing a company by selling the bonds, notes or mortgages held by the business. Basically, it is borrowing money to keep your business running. Long-term debt financing is typically associated with larger assets such as buildings, equipment, land, and large machinery. The schedule for repayment for long-term debt financing spans for more than a year. Short-term debt financing is mostly associated with operations of the business such as inventory purchasing, payroll, and supplies. The repayment of short-term debt financing happens in less than a year. With debt financing, your business does not have to give up future profits…

Corporate Credit is a contractual agreement in which a corporation receives something of value now and agrees to repay the lender at some later date. This is almost identical to personal credit except it is a business entity, instead of an actual person, that receives corporate credit from vendors. Corporate credit is the largest business-to-business form of capital and is a very important source of capital for most businesses. Trade credit, for most businesses, is much greater than the funding provided by banks, alternative funding sources, and investors. Net terms refer to how long your business has to pay the…

A convertible note is a debt instrument that can be converted into stock at the option of the holder or the issuer. More specifically, the investor can choose to convert the total amount of the note into equity when an institutional investor (such as a Venture Capitalist) makes an investment.  The cost of borrowing is lower for the seller, with convertible notes, since the buyer has the option of converting it into stock. Convertible notes are tools used by large companies to raise capital for their projects and operations. This is known as a debt offering since the company literally goes into debt to the investors…

Convertible debenture is a debt instrument that can be converted into stock at the option of the holder or the issuer. Instead of receiving payment, the buyer of the debenture can choose to take stock in the company. With convertible debentures, the cost of borrowing is lower for the seller since the buyer has the option of converting it into stock. Debentures are tools used by large companies to raise capital for their projects and operations. This is known as a debt offering since the company literally goes into debt to the investors until the price of the debenture is paid back,…

Interim loan is a short-term financing option for your business. Interim loan financing is an excellent option for your business if you are seeking to purchase commercial real estate, or if you are in the construction phase of building a new property. These loans allow you to remain in your current location while the new facility is being built. An interim loan is also great for businesses that want to sell their current property to upgrade, but they can’t afford to miss a good real estate price because they have to wait for their business to sell. The interim loan would give…

Collateral note is a promissory note secured by the pledge of specific company assets. Basically, when a business signs a promissory note while receiving funding, they are promising to pay back the loan on a certain timetable earlier agreed upon. To guarantee this note, they use company assets as collateral. The pledging of assets gives the bank some security if, for some reason, the borrower is unable to make payments. In this case, the bank is able to seize and/or sell the pledged assets to gain back some or all of the money they lent out. Collateral is a lenders main source of…

Collateral is assets pledged by a company to secure a loan. In the situation of a mortgage loan, the house would be the collateral for the loan. This gives the bank some security in case the borrower is unable to make payments on the loan. In this case, the bank would be able to sell the house to get some or all of the money back that they had loaned out. Promissory notes play a large role in the pledging of assets to a bank or other funding source. A collateral note is a promissory note secured by the pledge of specific company…

Capitalization is also known as “market cap.”The sum of a business’s long-term debt, stock and retained earnings. Capitalization is basically a measurement of a company’s value and size. The measurement is different from equity value since a firm has securities and stock options than can be converted into common shares. One of the measurements of a public company’s success or failure is looking at the size and growth of its market cap. Sometimes a company’s market cap can fluctuate for unknown reasons that have no relation to the performance of the business such as acquisitions, divestitures, and repurchases. To measure market capitalization, you must take the number of common shares…

Capital investment is the money used in acquiring a fixed or capital asset. Capital investment money is usually provided by private and non-private sources. Private sources consist of “angel” investor networks, which are typically affluent individuals with money to place in start-up businesses with high potential. These angel investors mainly consist of ex-business owners and CEOs that are retired and have vast expertise in their field. Non-private sources include venture capital firms and SBICs (Small Business Investment Companies). This type of funding is normally more difficult to obtain than private funding. Also, non-private sources are less patient with their return on investment than private sources. The funding…

Capital asset is a tangible property that cannot easily be converted into cash and that is typically held for a long period of time, generally over a year. Some examples would be real estate, machinery, and land since these types of assets cannot easily be converted into cash. Typically it is a piece of equipment or property that creates more property. For example, a factory can create products for the business to sell and a factory can include land, machines, and buildings. Almost every company has made an investment in a capital asset. Some companies may require large assets such as land,…

Business loan broker is an individual or entity that acts as an intermediary between a borrowing business and a commercial lender. When a business is unable to receive financing from a bank, most of the time they do not know where else to go. Business loan brokers exist to help companies get other forms of financing besides funding from a bank. Basically, a loan broker is like a middle man. If your business needs funding and you have no idea where to start, a loan broker can be a great asset in your search for capital. Loan brokers typically have a network…

Business lender is an entity that makes business loans to other companies for various uses. There are so many different types of business lenders that it can be an overwhelming task to find sources of financing that match the needs of your company.

Business leasing could be a great alternative to consider instead of purchasing. Your business can use business leasing to lease equipment, supplies, buildings, and many other things. Business leasing provides greater flexibility, easier qualifying, cash flow conservation, and many tax advantages compared to purchasing outright. There are several types of lease programs to choose from. Your Options for business leasing: Lease Line of Credit: Lease lines of credit are used for businesses that continually acquire new equipment. A lease line of credit allows you to avoid a new application for the piece of equipment you need. Operating Lease: Operating leases have terms that are shorter…

Before completing any business credit card application, it is a good idea to know what it takes to get approved and where they report. As a small business owner, It is important to know that a true business credit card will report to at least two of the three business credit reporting agencies and should not show up on your personal credit reports. Then check out long-term rates and not just introductory rates. Look for hidden fees, annual fees, balance transfer rates, late charges, cash advances and grace periods. Always look at your credit card statement carefully to check for accuracy. Understand the benefits: Save time tracking…

Cash advance is a loan taken out against the balance on a credit card. Usually, the limit of the cash advance is a percentage of the total available balance on the card. Most banks allow users to access the cash at ATM machines using their credit cards. It is important not to exceed the limit of the cash advance since the penalties would be similar to a regular credit card purchase that is over the limit. Today, credit and debit cards have nearly replaced cash but some vendors still require immediate cash payment upon purchase. Using a personal loan to pay…

Business capital investors include either private individuals/entities or non-private firms/banks who take an equity position in your business venture. That equity can be in the form of stock through a company’s IPO or from a prearranged percentage of equity. Typically, the private investors are successful entrepreneurs called angels that offer their expertise, experience and network of contacts.  Angels usually consist of ex CEO’s and business owners with an expertise in the field they are investing in. The non-private investors consist of SBIC’s (small business investment companies) and VC’s (venture capital) firms.  Angel investors tend to be more lenient with the time frame for their return on investment…

Business capital investments are funding invested in a company by a lending institution or affluent individual. Business capital investments for start-up companies are provided by either private or non-private sources. Apart from friends and family, private sources largely consist of “angel” investors. Angel investors are affluent individuals with previous business experience. They typically consist of former CEO and business owners. A primary non-private source would be an SBIC (Small Business Investment Company). The investment is used by the company to get off the ground and to start growing and generating revenue. The company later uses this revenue to repay the capital invested in…

Business capital is money that is used for the investment in a project or company. Business capital is the backbone for success in any business. If a business has easy access to business capital then that company has a great advantage in the business world. One of the most popular ways to obtain capital would be through a bank. Banks generally provide good terms for their borrowers but it is nearly impossible to get a bank loan unless your business credit and track record are impeccable. Luckily there are many different alternative sources of business capital. The fact that there are so…

Swing loan can be your bridge to opportunity. Swing loan financing has to be paid back much quicker than a standard business loan. This type of financing gives you the ability to take advantage of excellent purchase opportunities. A swing loan generally needs to be paid back in 6 months to 36 months. You can use a swing loan for anything for your business. This could include expansion, marketing, investments, commercial property purchases, etc. Swing loans will often times carry a little higher interest than a more lengthy business loan. Typically you would pay off the swing loan with a larger…

Bridge loan financing is an effective vehicle to immediately capitalize on a purchase opportunity. It is a form of short-term financing which is expected to be paid back – generally within the range of 6 to 36 months – once the borrower obtains more permanent financing. Bridge loan financing is important for not missing opportunities when they may arise. It is basically used as transitionary financing until your business can find a long-term and cheaper type of financing. Usually, bridge loan financing is used in commercial real estate to quickly close deals, rescue property from foreclosure, and many other purposes. If…

Bridge loan financing is an effective vehicle to immediately capitalize on a purchase opportunity. It is a form of short-term financing which is expected to be paid back – generally within the range of 6 to 36 months – once the borrower obtains more permanent financing. The basic purpose of a bridge loan is to allow the borrower to take advantage of any opportunities that may arise, typically in the commercial real estate sector. Besides commercial real estate, bridge loans are primarily used to quickly close a deal on the property, rescue foreclosed real estate, and to get short-term financing that will…

Bridge financing is a way for companies, just before their IPO, to obtain the cash they need to maintain operations throughout the process. Bridge financing can come in the form of stand-alone subordinated debt or equity transactions. Most often it is found in the form of subordinated debt. Usually, the funds are supplied by the investment bank who will, in turn, receive shares of the company at a discount from the declared issue price. This discount will typically offset the total amount of the bridge loan. The financing is basically a forward payment for the future sale of the stock by the investment banker.…

Bootstrap financing or Bootstrapping is to build a business out of little or nothing with no or minimal outside capital. Bootstrap financing or Bootstrapping is the practice of launching a business using only one’s own finances, together with money borrowed or invested from family or friends and revenue from the first few sales. It is a method of financing small businesses that involves buying and using resources at the owner’s expense rather than allocating equity or taking out sizable loans. Bootstrapping is the method of starting a business from scratch with no or little outside investment or financing. But why use…

Blue sky laws are state regulations that govern the sale of securities in an attempt to safeguard investors from fraud. The blue sky laws in each state vary in the specific details, but all states require securities, brokers, and brokerage firms to be registered with the state. Although the SEC is the most common enforcer of regulations against fraudulent practices, the states also have the power to go after violators of its anti-fraud, or blue sky, laws. Recently, the state’s authority and power to limit and restrict the sale of securities has declined as not to be duplicative of the federal…

Blind pool is a limited partnership that is set up for investment but doesn’t specify what companies the general partner plans to invest in. A blind pool basically sells securities to the public without them knowing what exactly their money is going towards. In some cases, the blind pool knows exactly what investments they plan to make with the investor’s money, but choose not to disclose this information in fear that potential investors might be scared away if they knew too many details. Blind pools are typically most popular during prosperous times. During these times, investors become less concerned with considering alternative investments…

Running a startup isn’t an easy task. From finding customers, and employees to investors, things can be pretty stressful to manage everything on track. While you are hustling yourself to fuel your startup business, maybe there’s one thing that hasn’t got your attention yet – the website. People often think that building a website needs technical knowledge and feel having a social media page is enough for them. On the contrary, please look at this finding – “Statistics show that people are spending 50 million fewer hours on Facebook than they did in 2017.” Some Facebook and Instagram pages always…

Best efforts offering is a term frequently used in the world of IPOs and businesses going public. A best efforts offering is when an investment bank or broker-dealer agrees to do its best to sell the company security offering to the public, but does not buy the securities outright or guarantee that the issuing company will receive any amount. This is one of several different types of underwritings used by investment banks. When an investment bank is hired to underwrite securities of a company, there are other types of offerings, including the most common, firm commitment. With a firm commitment offering, the…

Bankruptcy reorganization financing provides potential turnaround financing for your business. Bankruptcy reorganization financing is required for businesses that are facing difficult bankruptcy situations. Often times a management or employee buyout will be the main part of the reorganization. This strategy will save jobs and also give employees the opportunity to work together to turn the company in the right direction. Here is a good example of bankruptcy reorganization financing at work. If company ABC is facing bankruptcy and potential liquidation it will need to restructure the organization. They would contact a financial company and work with them to restructure the company.…

Bank loan providers want to see a proven track record before they lend you any money, but you can’t establish the track record until you get the loan. In order to get funded you have to know exactly what they are looking for? Most bankers look at the five C’s: Character. What is your credit history. Have you been a good borrower?Capacity. Do you have any industry experience?Capital. How much money do you need? Is there a clear understanding of the amount of funds needed and where it will be spent.Conditions. What are the terms of the loan? The loan terms should be structured so that…

Asset loan is a specialized method of providing structured working capital and term loans that are secured by accounts receivable, inventory, machinery, equipment, and/or real estate. An asset loan involves using existing assets in a company to obtain a loan from a financial institution. A business does not give up ownership of the asset, but instead uses it as a type of collateral. Only when a business does not make payments on the loan does the financial institution have the right to seize that asset. It is very important to make all payments on time. Why use an asset loan for…

Asset financing is typically structured as a line of credit secured by a specific asset or across a combination of existing assets. Usually, this includes accounts receivables, finished goods inventory, real estate, and/or equipment. With asset financing, a company uses its assets as collateral to obtain capital. The financing institution does not own the companies’ assets, but the assets can be seized if the business does not make its required payments on the loan. Besides working capital, asset financing can be used for many other purposes. Asset based loans are perfect for: Company acquisitions and business mergersManagement buy outsFinancing expansionTurnaround financeRefinancing…

What is the function of asset based loan? Asset based loan financing provides short term restructuring of a companies financial situation to facilitate maximum cash flow. It provides a period of recovery time and a financial operating environment where a company can demonstrate how it could perform with a long-term loan in place. This allows a company to demonstrate it is worthy of long term financing. An asset based loan does this by allowing a company to pledge its assets as collateral for a loan. The company still owns its assets, but they can easily be seized if payment are…

Asset based lending is a unique type of loan that is secured by a specific asset or a combination of assets, usually its accounts receivables and/or inventory. The company in need of funding pledges their assets, as collateral, for a loan given by a financing institution. Although the company still owns the assets that they pledge, they can be taken away if loan payments are not made in a timely manner. Asset based lending can be a great source of working capital for quickly growing companies and can be used to other purposes as well. With asset based lending, the company…

Finance is to raise money through the issuance and sale of debt and/or equity. Raising money through debt includes taking out a loan from a bank or other source. It can also include issuing debentures and other types of bonds. Equity financing involves selling ownership in the company to raise money. This is common with publicly traded companies that use an underwriter (investment bank) to sell their securities to investors.

Asset backed securities (ABS) are bonds that represent pools of loans of similar types, duration and interest rates. Unlike MBS (mortgage backed securities), asset backed securities are usually backed by non-mortgage based assets. The benefits of asset backed securities for the finance company include raising capital, and removing the loans from its balance sheet, so other loans can be issued. It also gives investors a diversified investment in a pool of loans which can be more appealing than a standard fixed income investment or corporate bond. Nothing changes for the original debtors (recipient of the auto loan, residential loan, student loan,…

Apartment building loan sources are numerous to say the very least. It can seem impossible to find the right source of funding for your business. A typical apartment building loan (also known as multifamily) is funding for the purchase or refinancing of a building usually with no less than 5 units. Before speaking with anyone it is helpful to have a “yes” or “no” answer to the following questions: Is the property fully leased (about 95%)?Do you want to borrow more than 80% of today’s value?Are you willing to re-finance the property or are you planning on sellingin the next 3 years or so?Will you accept…

Apartment building financing, or multifamily property financing, is the process of obtaining capital for the purchase or refinance of a multifamily apartment building. This type of funding is in a constant state of change. As a result, multifamily finance providers must have thorough knowledge and awareness of available debt programs and be prepared to quickly analyze financing options. The two most common types of financing for apartment buildings are fixed rates and variable rates. A fixed rate loan is just what it sounds like, a fixed interest rate that stays the same throughout the life of the loan. A variable…

Angel private investments typically come from successful entrepreneurs known as “Angel Investors”. These investors offer expertise, experience, and contacts that can be invaluable to the new venture. Angel investors often work in groups to improve the efficiency of their due diligence and to allow them to complete larger deals. Although angel investors require a high rate of return on their investments, they are flexible and willing to wait for an extended time period to receive their return. Angel private investments usually do not desire a large share of ownership in the company, but would rather play an active role in…

Angel investors are people or organizations who make investments in startups or early-stage businesses in exchange for an equity ownership interest. In exchange for a stake in the company, they provide cash to promising startup enterprises. It indicates that they offer financial support to small businesses or entrepreneurs, generally in exchange for stock ownership. Wealthy people who engage in company endeavors and offer money for businesses that need rapid funding are known as angel investors. Unlike venture capitalists, angel investors typically do not want a large amount of control in the companies they invest in. Angel investors are willing to…

Adjustable rate loans or ARMs, when pertaining to commercial real estate, are ideal for borrowers who expect rates to go down or those who prefer the flexibility of a short-term loan. Like any ARM instrument, the interest rate changes periodically according to an index that is selected when the mortgage is issued. With an ARM (Adjustable Rate Mortgage), you might qualify for a larger loan and your ARM could be less expensive than a fixed-rate loan over a long period. An adjustable rate loan is most beneficial to the borrower when the interest rates go down since their monthly payment will…

A commercial mortgage is financing for your business property needs. Commercial mortgage lenders will provide financing to qualified businesses for the acquisition or development of the commercial real estate. Whether your business is purchasing a gas station, office building, or even a golf course, a commercial mortgage is for you. Make sure you have quality business credit scores in place before approaching a potential lender. Capital TypeCapital Type DefinitionAcquisition and DevelopmentExcellent for raw land development including streets.Adjustable Commercial MortgageInterest can go up and down based on the prime rate.Construction Mini-PermIncome property construction with 3 to 5-year loan.Construction Loan with Takeout…

Acquisition financing is funding to acquire or merge with another business. It is the means of providing capital to acquire control of a company by stock purchase, stock exchange, cash, or any combination thereof. Qualifying and credit-related decisions are often based upon such factors as: Previous cash flow history of the businessThe credit history and experience of borrowerThe management experience of the purchaserThe quality and condition of the acquired assets Typical terms for acquisition financing are: 100% Project cost funding and loan amounts exceeding $250,000Up to 10 year terms, if the project does not include any real estateUp to 25 year…

An SBA “Certified Development Company” (CDC) can provide you with long-term, fixed-rate financing for important fixed assets through acquisition and development financing (land, buildings, etc.). This program includes a loan from a commercial lender that covers 50% percent of the project and a second loan for up to 40% of the project cost from the CDC that is 100% SBA guaranteed for a combined 90% LTV. Acquisition and development financing is an excellent option for a business that is looking to acquire more land to expand their current operations. The government supports this program because they understand the kind of…

Accredited investors are individuals or entities that meet certain criteria set by securities regulators to qualify for participation in higher-risk, less-regulated investment opportunities. They are considered financially sophisticated enough to participate in certain private investment opportunities that involve more risk. The Securities and Exchange Commission (SEC) defines accredited investors under Regulation D Rule 501 as those with sufficient wealth, income, expertise, or status to be deemed financially sophisticated enough to bear the risks involved with private securities offerings. Why Accredited Status Matters Being an accredited investor allows access to investments exempt from full SEC registration requirements, such as: These unregistered…

The investor is the entity that makes investments. Investing involves using money to make money. In the business world, investors consist of many different entities that will put money into a business in hopes that it will succeed and repay their initial investment plus the rate of return that was agreed upon when the investment was made. In public markets, investors consist of stockholders as well as bondholders. The public can invest in a company through the purchase of shares of ownership (stock) or by lending money with the expectation that they will get the full amount back plus interest (bonds.) Other types…

Accounts receivable loans are owed by customers to the business; amounts owed to a business for goods and services sold by the business but not yet collected. A key factor in analyzing the liquidity of a business is the ability to meet current obligations without additional revenues. Need immediate capital? Sell your receivables to a “Factor” at a slight discount. Accounts receivable loans (also called Invoice Factoring) are an expedient means of acquiring working capital by selling the invoice (accounts receivable) for a product or service that has been rendered. Despite the advantages of factoring, many businesses do not utilize this financing…

Accounts payable financing is money owed by the business to suppliers; amounts owed to others (creditors) on an open account for goods and services purchased by a business. Should I borrow to cover overdue payables? In many cases, yes. As a business, preserving a good standing with your creditors/suppliers is critical. Not only do you want to preserve business relationships, but you also want to preserve your business credit. Your business credit – Dun & Bradstreet Dun & Bradstreet provides commercial credit reporting services on businesses worldwide. Many business lenders and suppliers will base your ability to “re-pay” on your Dun…

Account receivables financing is also referred to as “invoice factoring”. It is the sale of invoices (receivables) to a factor company for anywhere from 70% to 90% of their total value. This is mainly used in order to generate immediate cash flow for the business selling the accounts receivable. The remainder of the invoice amount is remitted upon collection, minus a small service fee, of the outstanding invoices. It is important for the business selling the receivables to verify the creditworthiness of their customers. Factoring companies do not like when they cannot collect on a receivable they purchased and your business…

Funding, also known as financing, is the act of providing funds(money) to a business or individual for various uses. Business owners know that obtaining funding is an important, but often difficult task. There are so many options for funding a business that choosing the right one may seem impossible. Bank funding is generally the most popular type of funding but is also the hardest to get. If your business credit scores aren’t great then bank funding is pretty much out of the question. Luckily there are countless other methods of funding your business and you have to find the right lender to match…

Factoring or Accounts receivable factoring is a creative financing option that works for most businesses. A company might use factoring, a form of finance, to cover its short-term cash needs by selling its accounts receivable (invoices) to a third party. Factoring is the selling of a company’s accounts receivables, at a discount, to a factor who then assumes the credit risk of the account debtors. This is an innovative method for generating quick business capital that any business can do if they have accounts receivables to factor. In some cases, the factor will buy a receivable for up to 90% of the…

A credit line, sometimes known as a “line of credit” (LOC), is a sort of standing loan that allows individuals, corporations, or other organizations to borrow money up to a pre-set limit when they need it, repay it, and continue borrowing without having to qualify for a new loan. A credit line is an arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specific borrower for a specified time period. Credit lines are great to have for any business. With a credit line, you can borrow as much, or as little, as you want, as long…

Venture capital is funding invested into your business’s success. Venture capital includes funds that are made available by a private group of investors into a business with high growth potential. A group of investors will invest money into a business with the goal of earning a profit on their investment. They will invest in all stages of a company if they find it worthy of an investment. Venture capital is best suited for companies with a new, unique product or service that has a large national or international market potential.A venture capital firm also wants to make sure that the company…

Small businesses looking for working capital often have to look to many sources to find all they need. One possible solution for cash-strapped companies could be a merchant cash advance loan. With these loans, borrowers can receive a lump sum of money, which is then repaid from future credit card sales. While a cash advance loan can be very helpful, entrepreneurs need to consider all the risks as well. Pros of Merchant Cash Advance (MCA) Loans 1. Easy to Qualify Merchant cash advance loan credit standards are very minimal. Businesses do not have to have been operating very long or…

A “merchant cash advance” (MCA) is a working capital loan product that is provided by many of today’s business loan providers. This type of working capital loan has grown wildly popular due to the very flexible requirements for approval. In many cases, even the FICO score of the guarantor is not an issue. This type of loan is secured either by future credit card receipts or by “cash flow” that has been determined by the loan provider’s inspection and verification of the positive cash flow of the company’s revenue. MCA loans have loan amount and advance limits that are defined by the…

There are a plethora of online business loans available today. Most of these are short-term loans, similar to cash advance loans. They can charge extremely high-interest rates, but typically require little in the way of background or credit checks. This can be especially attractive to small business owners without a long business history or who are in a cash crunch. Even still, entrepreneurs should be careful before jumping into a short-term online loan. Here are 3 concepts to consider before signing on the dotted line. Review All Your Options Even if you think you have no other options, look again. There may…

Debt vs. Equity: The Age-Old Business Funding Debate There is a constant debate over the use of the two main types of business loans and which is more useful. In reality, they both have their uses, and rather than arguing over the merits of each, organizations would be well to use a blend of both at appropriate moments during their growth. Small, or new business owners may not fully understand what the differences are, and some, new to the business financing realm may not even know what equity financing is. The term equity is bandied about in personal loans regarding…

What is External Financing? External financing is another source of capital for your business. External financing can take the shape of two different types of financing, debt and equity. Debt financing includes bank loans where a company gets financed by issuing debentures which they have to pay back after a certain period of time. It is called debt financing because the company is in debt to the bondholders and if they were to go bankrupt, the bondholders would have a claim to any remaining assets. In this case, these are secured business loans. Equity financing is when a company decides…

What is a lease? Simply stated, it is a contract where one party (who is known as the lessor) gives the other party (who is known as the lessee) the exclusive privilege to use and retain its equipment for a specific and predetermined period of time. Who can lease? Leasing has been a very attractive option for not only sole proprietorships, but also many partnerships, corporations, and even subchapter S corporations. What can be leased? Any new or used equipment that is used in your trade or business that is specifically designated within your company for the use of producing…

The cash flow statement is designed to track cash as it flows in and out of your business. It shows the causes of cash flow shortfalls and surpluses. If the cash flow is positive it indicates that the business is funding its daily operational working capital needs without the injection of external funds. If the cash flow is negative it indicates that external funds are needed to provide the working capital for business operations. Most businesses require cash to invest in new fixed assets such as new equipment, machinery, real estate, etc. When a company does need cash for investing…

When you’re ready to enlist the help of venture capital, angel investors, or even your local banker to secure funding for your company, preparing a solid and effective business plan is essential. While the business concept and information on key leadership are certainly important, investors and lenders are always going to want to get down to the nitty-gritty financial details of your firm. They want to know how your business shakes out by the numbers – how much your company is worth and what is it likely to be able to earn in the future. There are at least three critical…

Paying for the daily and long-term needs of a growing business can be challenging. Venture capital investments and small business loans can cover many of those costs if you can get them. One of the easiest options for business funding is business credit cards. While they do not generally have high enough limits to finance all purchases, many daily expenses can be effectively managed with business credit cards. Beyond just purchasing power, these cards offer three great bonuses. Rewards Most of the major credit cards – VISA, Mastercard, American Express and Discover – offer reward plans with their business credit accounts. Just from making…

As your small business grows, you may find it necessary to have employees make purchases for the company. Cash and business checks are possibilities, but both have limits and liabilities. Business credit cards can offer at least 3 great benefits: 1. Tracking Purchases is Simpler With business credit cards, all purchases are easy to track. You can simply go online to see complete records of every transaction. When using cash and reimbursements, it can be easier for employees to fudge the numbers or make unauthorized purchases. Business credit cards can allow you to not only track all purchases but also put very…

In the course of trying to raise money for your business needs, you have the choice of seeking dilutive or non-dilutive financing. Each has a role to play, but it is important to time them right to make the most of your ownership. Dilutive financing Dilutive financing is any type of capital received by your company that diminishes your ownership. This includes deals with angel investors and venture capitalists when you give up a portion of your equity to gain their cash. It also includes any public or private rounds of funding that sell shares of your company. Non-dilutive financing Non-dilutive financing…

Your business has decided to jump into the commercial real estate market. Whether it is to buy a property for your own business operations or investment to make money, there is a lot to know about commercial real estate and mortgages. You may be familiar with the structure of residential mortgages, but how do they compare to commercial mortgages? Commercial mortgages cover buildings and properties that are used exclusively for business purposes, generally not for personal housing needs. Often that means the commercial mortgages are made to business entities rather than to individuals as in a residential mortgage. Examples of business…

Before your business can qualify for valuable small business loans, you’ve got to be able to prove your creditworthiness to lenders. Most often that requires building up your business credit score. The following are four of the best ways to strengthen your credit profile in order to get your firm the funding it needs. Credit Tip #1 Start Today Having no business credit history can sometimes be as bad as having blemished credit. In order to establish a business credit profile, you will need to register with the credit reporting agency Dunn & Bradstreet. Then open a business credit card account and start…

It happens all too often for small businesses: they are making money on the books and yet there never seems to be enough working capital to keep the company operations running. There are several reasons this could be happening. In order to devise a solution, it is essential to understand the difference between four key business finance terms. Profit Being profitable is defined as the difference between the amount earned and the amount spent on operating a business. Your business can technically be profitable without having working capital, due to large business loan debt or rapid growth in inventory, accounts receivable, or fixed assets.…