5 Ways of Raising Capital for Your New Business

Creativity reigns when raising capital for your new business. There are many ways to raise capital for your new business. The key is to be resourceful and focused on the right things in the process. Every region in the US has a Small Business Administration as well as an economic development agency. The job of these groups is to provide information and resources to new business owners as to capital availability. They have many relationships and can introduce you to people with capital formation expertise. They are a great place to start networking because lenders and investors usually affiliate with these groups.

Family and friends are a great first stop when raising capital for your new business. It that option is not available; there are many angel investors across the US. Angel groups are formal groups of high net worth individuals who like to invest in entrepreneurial businesses. Some angel groups have monthly or quarterly meetings which invite entrepreneurs for presentations. Though the check size is usually small, angel investment can come together relatively quickly.

There are technology fairs across the US organized by venture capital associations. These regional associations usually put on annual or quarterly events that showcase up and coming companies. A great example of this is the Smart Start Venture Forum help in Upstate New York every year. Venture capital events are a great way to show your product and test your story in front of a large and discriminating crowd. Often, these events are structured so that each company does a formal presentation to a crowd of venture capitalists. They receive feedback on their product and marketing ideas. They events are like beauty pageants and there are best in show as well as cash prizes for the winners. Sometime the cash prizes can be meaningful such as $25,000 or $50,000. Both the experience and the feedback are very valuable for most new business seeking to raise capital.

Asset based lending is a loan against your assets such as accounts receivables. There are many accounts receivable financing companies that will factor your accounts receivable once you have sales from creditworthy customers. This provides you upfront cash though it is often a high fee percentage or interest rate.

Crowd sourcing is a new way of using the power of the internet to raise capital. This is an emerging trend. This is a good way to get going if you are at the seed stage but have a very compelling business opportunity. Typically, crowd sourcing is very difficult to pull off and the capital raises are small dollars – generally under $500,000. Crowd sourcing is a technology savvy way of raising capital for your new business. The downside is that you will likely have many shareholders and the approach is not necessarily ideal for larger size capital raises.

Finally, many entrepreneurs are looking to creative ways of bartering or trading with other companies to expand their resource base. Strategic channel partners can provide valuable sales resources which is functionally equivalent to them making direct cash investment in the business. Many technology development companies are willing to provide free services in exchange for an equity position or exclusive contract to provide more services.

Using Retirement Funds to Finance a New Business

Today, the times have changed. Instead of living a peaceful post retirement life from their hard earned savings, people are now thinking of investing their retirement money in new business so that their money grows further. Research suggests that 1 million people start a business in America per year. People have started using the funds from their 401k plans to start a new business without attracting tax penalties and other consequences of debt.

Under the Employment Retirement Income Security Act, you can transfer your retirement funds for a usable capital that can be used for business investments. Even if a person has about $40,000 in his retirement account and he is not currently employed by any organization, he can qualify for the Small Business Administration recognized approach where the funds can be used for purchasing a franchise or an existing business. The funds can also be used for start up expenses such as purchasing property or furniture or working capital such as paying salaries or also business expansion such as introducing new franchises.

If you think that you are ready to explore this new financing option, then you should be sure that you consult a financial expert who will guide you through the whole process. This financing option is good if you have accumulated enough funds in your retirement account. You can start a new business where you first establish a C corporation and then this new corporation has a retirement plan. The funds are invested in this retirement plan and the new plan purchases the corporation’s stock.

Small Business Finances – Accounts Receivable Factoring


By Kristin DeAnn Gabriel | Submitted On December 16, 2008
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Expert Author Kristin DeAnn Gabriel

As many people know, owning and operating a successful small business means keeping accurate and timely financial records. Why? Because your financial picture allows you to monitor your small business and determine its successes every month. Good record keeping also provides you with the information you need to evaluate the financial decisions that you’ve made.

Many small business owners think is that they have to hire an outside accountant to run their business. This is not necessarily true. Consider the fact that you could save money if you or someone in your company or family were to keep the books, rather than a costly outside accountant. An accurate set of financial records in-house will minimize costs of paying an accountant and enable you to have more control of your business finances.

For example, what if your clients are late paying you one month, and you need more money to pay bills? Then you would know right away that you might consider factoring, a solution that could provide funds in about 24 hours. Invoice factoring, or accounts receivable factoring, has been around for 4,000 years, but single invoice factoring is a great new way to provide short-term working capital for growth.

You might not always get paid right away for a product or service that you have already delivered, so factoring could be the answer. Today it is harder than ever before to secure alternative financing through banks or venture capitalists. Accounts receivable factoring, also known as spot factoring, is a fast way to turn your receivables into cash rather than waiting up to 90 days for an invoice to get paid the funds.

It works like this. A factoring company will take a long look at your client’s credit, instead of yours, then if approved, you will get paid in around 24 hours. Fees for this service vary. Factoring companies collect the funds from the customer.

Financial tips for operating a small business includes the fact that it is important to keep your records including canceled checks and other business documents in an orderly and safe place. It’s important to place your receipts in the proper categories during the year, so it will be easier at tax time.

Small businesses aren’t required to keep a formal set of books, but make sure you choose the best record keeping system. Here are a few more tips:

– Employee compensation records — make sure you keep tabs on what you pay your employees and when raises, bonuses or commission checks are due.
– Expense summary — keep records of your monthly business expenses.
– Bank statements — when you receive your statements every month, be sure to prepare a bank reconciliation document to help you balance your checkbook.
– Summary of receipts — keep a record of gross income that is totaled daily, weekly or monthly, and keep track of where the funds came from.
– Disbursements record — this is a check register or expense journal that shows payments of bills where you record all the transactions in which you paid out cash or checks.
– Asset purchases — keep a listing for equipment, vehicles, or real estate that is used in your business.

Start-Up Business Needs for New Business Owners

Many people have great business ideas but never get them off of the ground because they are intimidated by everything that goes into starting a business. Although it is a challenge, the rewards are well worth it. Starting a new business can be made simple for someone who plans ahead and follows a few simple tips for success.

One of the first steps for someone who is starting a business is getting their company incorporated. If possible, it is a good idea to shop around in different states and see where it would be best to incorporate the business. Delaware, Nevada and Florida are just a few states that are known to offer special benefits for companies that are just starting out.

Some businesses are very small when they start out and owners may think that their personal bank account is sufficient to handle the finances. However, no matter how small a business is, it is always a good idea to have a separate business account. This helps keep personal and business money separate and many banks offer better rates for a small business account.

New business owners should also keep in mind that the tax requirements of their business will be very different than their personal taxes. Even someone who does their own taxes independently should hire a tax consultant for their business. Business tax laws are complicated and ever changing, and one small mistake could be detrimental to the success of a new company.

In many cases, a new business needs to run out of a home or a very small office space. If space is an issue, it may be a good idea to invest in an order fulfillment service. These companies can not only store inventory, but they can also handle shipping and even process returns so that time and space are available in the office. The amount of money a company can save by doing this is staggering.

There is no denying that starting a new business can be overwhelming because there are so many different factors that must be taken into consideration. It is important for new business owners to remember that the finances of a business are not the same as those in their personal life, and to plan accordingly. Having a separate business banking account as well as a business tax advisor can make the start-up process significantly easier and lead to greater success for the business in the future.

New Business Start-Up Tips Includes Factoring

There are 3.2 million fewer jobs in the United States today than it did when President George W. Bush took office, including 2.5 million fewer manufacturing jobs. More than Americans have lost their jobs… and we are counting more every day. According to a Rutgers University, University of Connecticut report, The Disposable Worker: Living in a Job-Loss Economy.In the past three years, nearly one in five U.S. workers was laid off from the job.

In the past three years, nearly one in five U.S. workers was laid off from their job, according to “The Disposable Worker: Living in a Job-Loss Economy” report.

A number of people who have lost their jobs are taking the risk to start their own small businesses. And with an economy in shambles, starting out on the right foot is essential to their success.

Here are some solutions to common costly mistakes made by new business owners:

You may need to register your business — and check directly with the government agency that handles your town because city and state requirements are different, ranging from whether or not you have to charge sales tax to hiring employees. If you do not abide by local and state ordinances you could be tapped with heavy fines,legal action, or your business could even be shut down.

Professional licenses must be maintained — or you could face serious personal fines, or experience lawsuits from practicing without these requirements.

Charge the right taxes — as doing business varies from location to location in sales tax regulations. All but five states charge sales taxes including: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Obtain a unique business name — because trademark laws are often vague, but one thing should be very clear when choosing a company name. Make sure it does not already belong to someone else or you could be in for someone to sue you.

Make sure your company is insured — as typically insurance needs will vary depending on the business, Just make sure you have the types of insurance that leaders in your field recommend because the last thing you need is an expensive liability claim.

Last, one secret to a successful new startup business is known as invoice factoring. This 4,000 year old business tactic is a very simple financial transaction. A business sells its accounts receivables, or their outstanding invoices, to a third party known as a factoring company at a discounted rate in exchange for fast cash with which to finance continued business.

Invoice factoring is an ideal way to ensure business growth. It allows you to manage the cost by selling invoices that will be paid soon and by only taking the amount that is needed for continuing operations.

Invoice factoring is also known as accounts receivable factoring, and it differs from a bank loan in three main ways.Here’s how:

1. The value of the receivables is emphasized and not the firm’s credit worthiness.
2. Invoice factoring is not the same as a loan – Rather it’s the purchase of a financial asset also known as the “receivable” or an outstanding invoice that has not yet been paid.
3. Bank loans involve two parties whereas factoring involves three parties.

In summary, it is important to take the time to set up your business correctly and thanks to using proven business strategies like invoice factoring from the beginning, your business will have a better chance to be successful.