Business Funding: From Venture Capital to Angel Investing

While the venture capital funding market isn’t as friendly as it once was, VCs still offer entrepreneurs an avenue for business funding. Couple that with angel investors and you have a couple of different financing options that can get your business off the ground and running.

Venture Capital is a New Ballgame
The CleanTeachies Blog waxes poetic about the early days of venture capital funding. $100 million in capital spread out over a handful of businesses at around $5 million each. The worst would be tossed and the best would manage a healthy return that would more than cover the initial investment. With the credit crunch placing a spin on everything, that business model no longer works. So venture capital funders are searching for a new model, which is causing them to be much more cautious.

Angel Investors Picking and Choosing
According to About Business and Finance, angel investors are still lending money--they’re just being much pickier about the business in which they invest. The key is a near bulletproof business plan that covers all of the bases. A good management team is also essential as investors need to feel comfortable in the leaders of the business--and their money.

If neither one of these financing options are attractive to you, Vendorseek suggests applying for a line of credit. More like a traditional loan, a line of credit allows you to only use the money that you need when you need it.

Business Loans: From the Traditional to the Alternative

When seeking out business loans, it’s a smart idea to examine all options before choosing. Business loan opportunities exist from the traditional to the alternative. Look at both sides of the coin and then get your materials together.

Traditional Lending is Tight
The Federal Reserve Bank of Cleveland paints a dismal picture of traditional loans in the throes of a credit crunch. The Federal Reserve Board’s January 2008 survey found considerable tightening of credit standards for commercial and industrial loans. In fact, one-third of all domestic banks and two-thirds of all foreign banks have tightened the standards for business loans for small and medium-sized firms.

Alternative Lending Shows Promise
Due to the rush of business, alternative lenders are making attractive offers of business loans for organizations with bad credit. These loans are ideal for those suffering financial problems such as bad credit history, bankruptcy, or failing to repay current loan amounts in time. The terms are a bit stiffer for bad credit loans, but they are a viable option.

Ready Yourself for Application
Vendorseek reveals the process of preparing to apply for a traditional or alternative loan. Create a strategic plan to show lenders that your business has a market as well as a plan for reaching that market. Review credit lingo and bring a lawyer to ensure that you get the best deal possible. Shop your business around to several lenders and compare offers.

Merchant Cash Advance: How and Why It Works for Small Business

What if, instead of building your business on the prospects of future growth, you could build it on the actuality of daily sales? Traditional loans are somewhat of a gamble. The merchant cash advance takes a more pragmatic approach. Here’s how the merchant cash advance works and why it’s a smart form of alternative financing.

Who are Prime MCA Candidates?
According to Businessweek, the best candidates for merchant cash advances continue to be retail, restaurant, and service companies that have strong credit-card sales but don't qualify for loans because they have bad credit or little or no collateral. Also, companies that experience seasonal ups and downs might benefit from this funding opportunity.

MCAs Beat Conventional Loans
Vendorseek reports that the key benefit of a merchant cash advance is flexibility in repayment. Keep in mind that an MCA is not really a loan at all. It’s an advance on future credit card sales at a rate agreed upon by the financer and the business. For those organizations that experience a seasonal flow of business, an MCA repayment can adjust to reflect that change.

Use the Funds for Virtually Anything
There are little, if any, limitations on the way you can employ these funds (another primary benefit). With traditional loans and lines of credit, lenders have the authority to place restrictions on how you spend your money. The My Merchant Account Blog offers this list of possible uses for funds from an MCA agreement.

• Advertising
• Emergencies
• Equipment
• Expansion
• Inventory
• Renovations
• Taxes
• Working Capital

Unsecured Business Loans in the Form of the Merchant Cash Advance

In traditional financing, an unsecured business loan is typically reserved for those with pristine credit. Thanks to the recent credit whirlwind, that type of credit record is proving to be few and far between. But a different group of unsecured business loans from alternative funding sources are giving business owners new life. Case in point? The merchant cash advance.

The Structure of Unsecured Business Loans
BusinessFinance reveals several aspects of unsecured business loans that you should be familiar with before applying for one:

• Financing usually does not exceed $50,000 for unproven startup businesses
• Can be used for the purchase of equipment, remodeling, office expansion, or marketing
• Typically in the form of a line of credit that can be drawn on whenever the need arises
• Interest begins only on the money you borrow from the line of credit

MCAs Offer Reduced Stress, Friendlier Repayments
Perhaps the most unique feature of a merchant cash advance is the repayment schedule. Because there’s never an actual loan made, there are no APRs or minimum payments to contend with. According to Vendorseek, merchant cash advances share the following characteristics:

• Because the flow of information makes it easier to determine which businesses are creditworthy, those that are extended an MCA typically deserve it
• Payment takes place directly through the credit card payment system, so there’s no need to write monthly checks
• Monies are extended based on actual growth as opposed to projected growth, decreasing risk considerably

And on a final note, ChristiaNet remarks that requirements will vary among different lending institutions as to the criteria a company must meet in order to obtain an unsecured business loan or merchant cash advance.

Loans for Business: Hope Amidst Frustration in 2009

If you’re a small business owner, or have dreams of becoming one, recent news on the financial front can be a bit discouraging. The lead story in every newspaper and online publication is the apparent freezing of lending across all fronts. Keep in mind that it’s never really as bad, or as good, as it seems. Here’s why.

First, the Bad News
Sometimes, it’s best to prepare for the worst and hope for the best. In that spirit, we’ll examine the challenges that lie ahead. In its Top 5 Trends for Small Business Finance in 2009, Small Business Trends paints a fairly bleak picture in the efforts to acquire loans for business. Here are a few of the lowlights:

• The amount of capital provided to small and start-up companies will continue to shrink
• Investors in start-up companies will face a poor market for exiting from their investments
• Government officials won’t pay much attention to entrepreneurial finance

MCAs Provide Some Light
The merchant cash advance is an alternative form of financing that is garnering some much deserved attention in the last five years or so. Vendorseek describes the primary advantages of the MCA process.

• Credit history plays no part in your getting an advance
• MCA lenders are much more pragmatic and objective in decision-making
• With an MCA, there’s really no lending involved

There’s Always the SBA
SBA Loans Shack reminds us that the Small Business Administration is always a viable option. Loans for business are typically offered in amounts between $100,000-$2,000,000. And last year the SBA assisted small businesses with over 12 billion dollars of loan guarantees.

Small Business Loans Still a Viable Option for Entrepreneurs

With traditional lending in a virtual upheaval, many small business owners aren’t even considering small business loans as an opportunity to launch or expand. However, smart entrepreneurs follow one piece of advice: always consider every option. The SBA is still a viable option for securing the financing you need to help your small business get in or stay in the fight for solvency. Here’s more.

The Small Business Administration (SBA) GAAP Loan
Free Articles Directory About Business features some poignant instruction by author, expert financial consultant and real estate investor Patrick Zanders. He discusses the SBAs GAAP Loan that is remarkably friendly on several fronts. This unsecured (READ: no collateral required) financing option can be approved and delivered within 10 business days at extremely low interest rates. Almost anyone is eligible for approval.

Strategies for Borrowing Success
About.com relates timely information on the new rules of small business loans and how to make them work for your particular situation. In effect, credit is everything. Reviewing your personal and professional credit history will place you in an enlightened position to approach lenders. Also, having a solid business plan will demonstrate that you’ve carefully thought out your strategy and are much more likely to repay with confidence.

Get Yourself Together
According to Vendorseek, there are some additional moves you can make to increase your chances of finding and attaining small business loans.

• If collateral is required, putting your home on the list is helpful
• Gather at least 24 months of business activity records
• Consider a line of credit as an alternative to small business loans

Business Cash: Looking Within Your Business for Financing Opps

There’s little doubt that the credit crunch is not a short-term problem. As unemployment increases and the mortgage crisis continues to spiral out of control, traditional sources of business cash will be difficult to tap at best. But what you might not realize is that there are ways you can leverage current business resources to draw out much needed capital. Here’s how.

What are Internal Financing Sources
According to BusinessDictionary, internal sources of business cash can from a variety of areas, such as retained profits, sale of assets, or the sale of goods and services. Keep in mind that these are resources that you already possess which can be leveraged for immediate business cash for expansion.

How to Leverage
Vendorseek offers several ways you can turn these often slow-paying resources into lucrative, and most importantly timely, assets:

• Invoices. A merchant cash advance organization will pay you cash for a portion of your future sales
• Suppliers. Some suppliers will extend you credit on their goods and services once you’ve demonstrated an ability to pay
• Leasing. Leasing, as opposed to buying real estate and machinery can free up much needed cash almost immediately

Making Taxes Work for You
The Small Business Finance Advice Blog reminds you that being savvy with your potential tax deductions can also create an internal source of funding. That means consulting industry experts for all available deductions and bringing your business to an accountant who specializes in your industry.

Merchant Funding Trends for 2009 and Beyond

What once was the best-kept secret in alternative funding is no longer so. Merchant funding has been revealed as the go-to source of venture capital funding for those small to medium-sized businesses looking to escape the traditional lending loop. In fact, it isn’t a loan at all. And that means you’ll be a lot freer to make the moves to grow your business in 2009. Here are a few of the trends that will influence the merchant funding industry.

Operating Capital Yes, Collateral No
Vendorseek offers a quick rundown of the merchant funding process. Savvy business owners are no longer putting up their homes or other personal finances in order to fund their business growth. Instead, they’re selling a portion of their future sales for cash right now. That means no minimum monthly payments, no APRs and no stress.

• Worthy Businesses. Merchant funding sources gauge a business’ eligibility by volume credit card sales (sometimes referred to as invoices)
• Instant Repayment. Your debt is settled through the credit card process, so you never actually have to make a payment

Merchant Funding Sources Consolidate
The Rapid Merchant Funding Blog states that leading companies in the Merchant Cash Advance (MCA) industry have come together to form an industry trade association called The North American Merchant Advance Association. This coming together of industry leaders should result in a host of positives for businesses looking to take advantage of the MCA, such as education, parity and best practices.

And as an aside, Rapid Advance reveals that merchant cash advance operators prefer VISA and MasterCard over Discover and American Express.

Commercial Loans: Securing Investors Wins, Hands-down

If you’ve tried to secure a commercial loan in the past year or so, you know how difficult and stressful the process can be. What you may not know is that if you have a valuable product or service that meets a public demand, securing investors is always preferred over borrowing. The benefits of finding investors are too numerous to mention, but here are a few.

It’s Just Too Darn Tough to Borrow
The Washington Post captures the problem perfectly. Although demand for commercial loans remains high amid a global credit crunch, commercial banks and investment firms are continuing to borrow less from the Federal Reserve's emergency lending program. And this means less money for your venture, plan and simple. Commercial banks averaged $86.3 billion in daily borrowing, down from $88.4 billion just two weeks before. And that’s hardly comforting statistics.

Investments Means Less Stress for You
VendorSeek reports that, rather than dealing with a huge loan payment, investors will allow you to put all of your money towards the startup of the business. Because investors accept a certain amount of risk up front, you might not even be expected to pay back some or all of the funding should your project go belly up.

Beware of the Quick Response
If an investment firm or freelance broker promises you funding immediately, you should do a double take. Why? According to the Commercial Loan Broker blog, even professional, experienced brokers have no idea what can or can not be funded today. A real professional will try and match up your financial needs with the appropriate commercial loan opportunities, and that takes time.

Restaurant Financing: Where to Find It, How to Secure It

Despite an economy in a downward spiral, this may be the perfect time for you to start a restaurant business. Why? First of all, the competition is down as those on the bubble have certainly left the business. Secondly, traditional banks are hurting for customers and are offering some fairly acceptable APRs and low down-payments. Here’s more on obtaining restaurant financing in a trying economy.

Sources for Lines of Credit, Credit Cards and Other Small Business Funding
Not as hard to find as you might think. Due to the credit crunch, traditional lenders are a bit more scrutinizing when you apply than they were five years ago. However, keep in mind that they want to lend you money as their business depends on it. Allfoodbusiness.com lists this handful of business financing sources to consider:

• The Small Business Association
• The US Department of Housing and Urban Development
• Commercial finance companies, such banks and equipment leasing companies
• Personal resources, such as friends and relatives
• Private investors, also known as "angel investors”
• Life insurance policies
• Real-estate assets

Tips When You Apply
In case of venture capital funding, make sure that you retain controlling interest in your restaurant business. Run all contracts through an attorney before you sign anything.

Get loan offers, interest rates and other sensitive information in writing before beginning the construction process.

Prepayment penalties can be stiff, but you shouldn’t have to pay for settling a debt early. Resist the prepayment clause in your contract.

Business Funding: Where It Will Come from in 2009

Ask any financial expert and they’ll tell you. 2009 might be a horrendous year for business funding and financing overall. The question remains: How bad will it actually get? But for those poised to start a new business in the New Year, failure is not in the vocabulary. Here’s a brief glimpse into the likely business funding sources for 2009.

AllBusiness Says Alternative Funding Sources Emerge
According to AllBusiness, the sagging financial picture just might change the type of businesses that ignite or expand. There is the potential for a paradigm shift from capital-intensive start-ups to more ecommerce ventures, which are inherently easier to fund in the short term.

Those businesses that fit into a specialized industry, such as ecological or research, will look to industry organizations for venture capital funding. Private funding will continue to attract attention from those looking to avoid traditional lending venues.

BusinessWire Loves R&D Activities
For those looking to begin research and development (R&D), BusinessWire reveals the opportunity for funding in this area in 2009:

• The U.S. Federal government is predicted to spend a total of $99 billion on R&D
• Industry sources will fund $252.8 billion in industry research and development
• Academia will receive about $3.0 billion and non-profits $1.6 billion
• Global R&D spending will reach $1,140 billion in 2009 over 3 percent higher than in 2008.

Technology-based companies should get special business funding consideration in response to our push for products and services to simply our lives.