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Cash Is Not King.
I'ts the Entire Royal Family.

Cash Is Not King. It’s the Entire Royal Family.

April 3, 2017

The emotional journey for entrepreneurs is as follows: uninformed optimism leads to informed pessimism leads to crisis of meaning. And at this juncture you have two options: crash and burn, or reach informed optimism.

This emotional journey can be broken down by hour, day, week or month. You can look back on your year and recognize in June you were hovering on informed optimism, but by October you had reached a crisis of meaning.

The best way to manage a crisis of meaning is with peer-to-peer support. Peers, those that possess relevant experience as entrepreneurs like you do, are not the folks that can simply give you advice. You don’t need advice. What you need is relevant experience. This is the linchpin between you crashing and burning or you reaching the high road with informed optimism.

Experience has shown that the crisis of meaning for business owners often revolves around cash flow. Cash is not king. Cash is the entire royal family. It is the blood of business. For your business to thrive you must have a cash-management solution for every stage of your business lifecycle.

The stage we want to focus on is the upside. Business growth. We’ve heard many times of businesses that pass on an opportunity due to lack of resources. Not only is there a loss of revenue, but competitors will assuredly seize market share. This is market share that could have been yours.

This article focuses on tips on how to avoid this. Let’s review your cash infusion options and discuss the pros and cons of each.

Funding Your Business

Traditionally there have been two ways to fund your business growth: debt or equity.

We have a third option. An evolution of debt-free financing commonly referred to as invoice factoring. Invoice factoring allows you to turn your accounts receivable into assets. And modern-day invoice factoring has evolved well beyond providing just cash. With value-added services it’s fast becoming the back office of businesses. Invoice factoring is often a core contributor to daily operations. Today’s next generation of invoice factoring represents the latest innovation in business financing.

So, let’s talk old school first.

Equity Financing

This dilutes your ownership. You will have other shareholders. You forgo a percentage of future profits for short-term funding. But, you have no obligation to repay the financing. Examples of equity financing include partners, venture capitalists, angel investors and crowd or cloud financing.

Debt Financing

Unlike equity financing, debt funding must be repaid in full plus interest. The upside? You maintain your ownership.

There’s a saying that you should have a relationship with a bank before you need a relationship with a bank. Why? Because banks don’t want a relationship with you when you need a relationship with them. They want you when you’re healthy.

Banks also often underwrite SBA loans. With this they share the risk with government. The upside of SBA notes is the potential for better terms and less security. The downside? It’s an arduous process heavily front-loaded and requiring significant periodic reporting.

Invoice Factoring

Welcome to new school. An evolution of debt financing, invoice factoring is when a company like Scale Funding advances you money against your invoices due. Your accounts receivable balance starts to work for you.

What’s the advantage?

  • No debt on your balance sheet
  • Funds are sent to you immediately
  • Factoring decisions are based on the creditworthiness of your customers, not on the creditworthiness of your company
  • Companies such as Scale Funding take on the burden of collections, so you can focus on running your business

This adds up to a solution that improves your cash flow, decreases your back office expense and allows you to beat competitors to market.

This is relevant experience. For more information on how this tool can transform your business model, contact Scale Funding at (800) 707-4845. or download our Definitive Guide to Factoring.

Download the Definitive Guide to Factoring