Whether you’re a Main Street small business, an Entrepreneur growing a business from start-up, or a Middle Market Business about to embark on an Initial Public Offering (IPO), chances are you’ve had to turn to your local or regional bank or credit union to borrow business capital. And chances are you’ve learned these business lending institutions make their decisions based on what is known in the industry as the three C’s of lending: Cash Flow, Collateral, Credit History (or Credit Score)
Sufficient cash, otherwise known as business capital, is necessary for any business to pay vendors and employees on time and to invest in real and intangible assets that enable growth. That’s why, as a business owner, it’s critical to understand what business capital is, and the differences between growth capital vs working capital. Business capital is available in two main forms: debt and equity. Debt instruments include term loans and other types of financing which require repayment in the future, usually with interest. Conversely, equity is normally in the form of stock and members or partners’ equity. Equity typically does not require a direct repayment of funds. In this post, we’ll go into greater detail by discussing growth capital vs working capital, and how each form of business capital may be used most effectively to help a business thrive.
Whether you’re growing a business organically or searching for ways to jump start business growth with a large cash infusion, don’t allow the large number of capital sources for your business become overwhelming. This post identifies several non-traditional (i.e. non-bank) sources of capital for your business.
As we gathered last week, instead of receiving the financial documentation we were promised, we were all relieved of our duties. Isn’t that a nice way to say “you’re fired”?
I continue to be surprised as I meet with entrepreneurs who truly regard Venture Capital as their Holy Grail. It’s as though they are looking for a Super Hero to make their dreams of entrepreneurial success come true. But having spent more than a few sessions on the entrepreneur’s side of the table in negotiations with venture capital firms, I know better. And it seems there are others who share my opinion!
Not long ago, one of my dear friends abruptly stated “it’s not about you” after patiently listening to my long story about a business relationship which changed, without warning. I just love this friend and how she was able to candidly share her observation which has proven to be brilliant and incredibly powerful.
Working with successful entrepreneurs who are dedicated to growing and selling a valuable business offers me the opportunity to learn from the best. I pinch myself most days as I am invited into the lives of my clients and have the privilege of experiencing the ups and downs of entrepreneurship. Truly, it is my pleasure!
Often entrepreneurs find themselves in a situation where their commercial bank considers their existing line of credit too risky to extend or renew. This places the entrepreneur and their banker at odds, and many times pushes the business owner to take drastic steps to keep their company’s doors open and paychecks coming. Has this happened to you or one of your fellow entrepreneurs?
Many people discuss the importance of pivoting in the context of a startup business. And I agree, once a business launches, the entrepreneur must be mindful of what is working and what is not. That’s when it is time to pivot the startup.
Bankers and Entrepreneurs rarely see eye-to-eye. Recently, my observation of this unfortunate reality caused me to chuckle as I sat with one of my clients and her business banker. What made me laugh was how two extremely accomplished individuals could define the term “special assets” so differently.