Business Financing: 3 Considerations

by Leo Pound on April 20, 2015

Business-Financing-Blog | Pound Consulting | Leo PoundBusiness and finance are inseparable in the minds of entrepreneurs. Seeking additional funding for an existing company can be a pivotal moment; determining if and when the time is right to finance a business depends largely upon projected viability of the business despite recent or near-term setbacks. If you are considering business financing, here are three important things to think about:

1. Funding Options

The first thing to be aware of is your financing options. Here are the basics:

Debt Financing. This is traditional funding via financial institutions; the majority of businesses are funded in this manner. A bank will provide your company with a loan or line of credit along with an interest rate and repayment schedule. Your company’s business plan, cash flow, liquidity of assets and collateral will be assessed.

Equity Financing. A company may be financed by a private or “institutional” investor in exchange for an equity ownership stake in the business. This type of investor can range from friends or family to angel investors, to strategic investors and venture capitalists.

Grants. There are billions of dollars grant opportunities available in the U.S. at the state and regional levels as well as for minority groups. However, applying for a grant can be highly competitive and how your business may use the funds is often strictly defined.

Crowdfunding. This is a relatively new type of business funding that takes place on the internet through hub sites like www.kickstarter.com and www.indiegogo.com. The goal is to create buzz for a business and draw in financial support from individual users via the web.

2. Size and Age Matters

It’s a known fact that unproven businesses have a more difficult time connecting with funding than those which have an established track record. However, the size of a business matters as well. Smaller business loans often have stricter terms and higher interest rates. The larger the business and the more years it has under its belt, the better the loan terms will be.

3. What’s in it for the Lender?

Needless to say, there has to be something in the deal for your lender, and your pitch and business plan should reflect this. A small business loan offers a percentage rate of return, but equity investors will want an appealing ownership percentage, or at the very least some clout in determining how your business will be run going forward. Angel investors may want an active role in your company. Crowdfunding investors will expect a “perk” of some kind, depending upon their level of investment.

Business and finance is an ongoing consideration for entrepreneurs. Determining if and when you should finance a business in the midst of its life cycle is a pivotal decision not to be taken lightly. Use a measured approach; do your homework, weigh your options, and if you’re still not sure, seek professional advice.

Still not sure what direction to take? Contact me and we’ll talk about how you can finance your business.

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Leo Pound

As Pound Consulting Inc.’s founder and principal, Leo Pound is responsible for day-to-day operations, as well as building partnerships, maintaining relationships and providing value to all clients. Born and raised in Philadelphia, Leo has spent most of his career helping companies around the world.  He has worked with many multi-national companies – including ones based or operating in China, Australia, Canada, England, Germany, Japan and more. He has in- depth knowledge of operational and strategic planning, M&A, forecasting and budgeting and cost containment. Leo is a hands-on professional who is sensitive to the pressures and challenges facing a troubled or rapidly growing company and their management team.

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