There are several ways to raise funds, or reduce the working capital needs, of a venture.
Even a profitable company may run out of working capital in the short-term.
for day-to-day activities, referred to as 'working capital,' can come
from obtaining a Line-of-Credit (loan) from your bank. A Line-of-Credit
allows a company to fund the effort in developing a product or project
until sales can be generated. Interest is assessed on the balance, so
when the credit balance is reduced, so are the interest payments
ways to improve working capital are related to rapid payment from
clients and slow(er) payments to vendors. Startup companies frequently
will not be given payment terms from suppliers, so they have to pay
cash in advance. By building a relationship with a supplier and
obtaining "trade credit," the company may be able to delay paying for
the product until it has been obtained, modified and sold to the client.
Debt or Equity in the Long-Term.
Loans can be obtained, usually from a bank, in which the entire
principal and interest must be paid back. Loan payments commence within
a month of receiving the loan and continue until the loan and the
principal are entirely returned to the lender. If it is a personally
guaranteed loan, the loan must be paid off even if the business is
unable to do so. A Small Business Administration (SBA) Guarantee can
help to make the loan more enticing for lenders. The SBA actually
guarantees 80% of the loan to the bank. An SBA guaranteed loan costs
two to three percentage points more on the loan but improves the
chances of loan approval. If an SBA loan goes into default, the bank is
80% protected, but you will still owe the payments to the bank and/or
to the SBA.
contrast, equity, or ownership, can be sold to investors (partners) who
receive a number of shares in the company. In this case, the investment
is made on the premise that the value of the company and the dividend
payouts will far exceed the amount invested. Investors receive a
percentage of dividends each year, based on their share of the profits
generated by the company. There are no monthly loan payments to make.
In fact, the investor is never paid back, even if the company fails.
are many variations of obtaining equity investors. One is to make an
Initial Public Offering (IPO). Usually "going public" is achieved by
rapidly growing companies (that are profitable or expect to be shortly)
that can utilize the funding to rapidly expand growth and market share.
SBP does not provide financing directly, but has established relationships with several funding/financing organizations.
international business can utilize all of the funding opportunities
available to domestic organizations. International funding, however,
can introduce complexities to the options available for domestic
funding. Transactions tend to be more complex, and usually require a
letter of credit. These complex transactions frequently present
short-term funding opportunities by utilizing Insurance guarantees and
Plan for Success… Get Funding!
Call SBP Co. at (888) 704-9100