secrets to raising capital help i need funding factoringbusinesssite com
I need money for my business: HELP!! No question¨Cit's scary out there. The ever-tightening capital market has many cash-hungry souls grabbing the first deal dangled before them, and that's a dangerous plan at a time when investors and finance companies are demanding onerous terms.
Sure, you will have to make concessions and consider terms unheard of in those glory days when VCs,factoring business banks and other financing sources bid against one another for a chance to supply funding with favorable terms and few strings attached.But even in a tight market, terms are negotiable, and fending off unreasonable demands now can help stave off disastrous consequences later. So when judging the benefit of potential funding, be on the lookout for the following red flags.factoring business
A lender undervalues your deal and won't budge. Valuation debates are more heated than ever in today's post-downturn market. While venture capitalists and entrepreneurs rarely see eye to eye on the subject, there are some gaps too wide to bridge. If all the VC is interested in is rock-bottom pricing,factoring business that should raise a flag that they're trying to take advantage of the times."
This harkens back to the VC market in the early '90s and the term 'vulture capitalists. We hear about venture-financed companies liquidated where the valuation wasn't significantly high, and management and the employees get nothing. For example,factoring business a venture capitalist that stipulates "three times liquidation preference" would be entitled to receive three times his or her investment before remaining funds are disbursed-which could leave company management empty-handed.
Disagreements can sometimes be resolved by making valuation contingent on hitting performance targets-but that's another desperation move that could get you in trouble. The VC can say, 'This is the valuation I place on the company today, but if you hit certain milestones,factoring business the company would be worth more money and I would be willing to pay more for it." Depending on how the contract is worded, either no new money will go into the venture or new money will go in at a significantly lower valuation. So entrepreneurs have to consider whether hitting the targets is reasonable and how much of the company will they give away if they don't."
Lenders demand unreal partnership agreements: You might be able to negotiate more favorable financing terms or even investment capital from your supplier as a way to manage cash flow in difficult times.factoring business But be warned: Such agreements can backfire if terms are too stringent. You don't want to be in a position where you've made an exclusivity commitment to a supplier and you have no other options if they're unable to deliver. Instead, make purchase contracts contingent on delivery within a given time period, such as 30 days.
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Hidden fees can kill a deal: Particularly when dealing with factoring companies, which will give you a loan against your accounts receivable, people often don't calculate the fees. These fees can vary widely by institution. Origination fees, auditing fees,factoring business fees on any unused portion of the loan and other expenses you pay can be profit centers for the bank¨Cand have you paying over 20 percent. So factor in the fees when evaluating a loan rate.
Lenders want ultimate power: Investors and lenders are no longer shy about asking business owners for decision-making power, a prospect that puts experienced entrepreneurs on edge. VCs sometimes ask for supermajority rights,factoring business which can effectively prevent you from doing things that make sense for the business. To gain guidance without sacrificing ultimate authority, negotiate a provision that additional funding or approval of business decisions will not be "unreasonably" withheld. There are legal standards of what is considered reasonable, so having 'reasonable' terms enables you to make sure they act and behave responsibly.
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Of course, sometimes you have to accept unwelcome terms¨Cor forsake the cash. If there are no other options and not having money will result in dire consequences, you have to strongly consider any option to have the business funded. At the end of the day, you can't be successful if you're not around.factoring business
Ken Honeyman
President
NuQuest Inc.
factoring business
(770) 433 8250
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