Alternative Financing Vs. Venture Capital: Which Option Is Best for Boosting Working Capital?

There are several potential financing options available to cash-strapped businesses that need a healthy dose of working capital. A bank loan or line of credit is often the first option that owners think of – and for businesses that qualify, this may be the best option.

In today’s uncertain business, economic and regulatory environment, qualifying for a bank loan can be difficult – especially for start-up companies and those that have experienced any type of financial difficulty. Sometimes, owners of businesses that don’t qualify for a bank loan decide that seeking venture capital or bringing on equity investors are other viable options.

But are they really? While there are some potential benefits to bringing venture capital and so-called “angel” investors into your business, there are drawbacks as well. Unfortunately, owners sometimes don’t think about these drawbacks until the ink has dried on a contract with a venture capitalist or angel investor – and it’s too late to back out of the deal.

Different Types of Financing

One problem with bringing in equity investors to help provide a working capital boost is that working capital and equity are really two different types of financing.

Working capital – or the money that is used to pay business expenses incurred during the time lag until cash from sales (or accounts receivable) is collected – is short-term in nature, so it should be financed via a short-term financing tool. Equity, however, should generally be used to finance rapid growth, business expansion, acquisitions or the purchase of long-term assets, which are defined as assets that are repaid over more than one 12-month business cycle.

But the biggest drawback to bringing equity investors into your business is a potential loss of control. When you sell equity (or shares) in your business to venture capitalists or angels, you are giving up a percentage of ownership in your business, and you may be doing so at an inopportune time. With this dilution of ownership most often comes a loss of control over some or all of the most important business decisions that must be made.

Sometimes, owners are enticed to sell equity by the fact that there is little (if any) out-of-pocket expense. Unlike debt financing, you don’t usually pay interest with equity financing. The equity investor gains its return via the ownership stake gained in your business. But the long-term “cost” of selling equity is always much higher than the short-term cost of debt, in terms of both actual cash cost as well as soft costs like the loss of control and stewardship of your company and the potential future value of the ownership shares that are sold.

Alternative Financing Solutions

But what if your business needs working capital and you don’t qualify for a bank loan or line of credit? Alternative financing solutions are often appropriate for injecting working capital into businesses in this situation. Three of the most common types of alternative financing used by such businesses are:

1. Full-Service Factoring – Businesses sell outstanding accounts receivable on an ongoing basis to a commercial finance (or factoring) company at a discount. The factoring company then manages the receivable until it is paid. Factoring is a well-established and accepted method of temporary alternative finance that is especially well-suited for rapidly growing companies and those with customer concentrations.

2. Accounts Receivable (A/R) Financing – A/R financing is an ideal solution for companies that are not yet bankable but have a stable financial condition and a more diverse customer base. Here, the business provides details on all accounts receivable and pledges those assets as collateral. The proceeds of those receivables are sent to a lockbox while the finance company calculates a borrowing base to determine the amount the company can borrow. When the borrower needs money, it makes an advance request and the finance company advances money using a percentage of the accounts receivable.

3. Asset-Based Lending (ABL) – This is a credit facility secured by all of a company’s assets, which may include A/R, equipment and inventory. Unlike with factoring, the business continues to manage and collect its own receivables and submits collateral reports on an ongoing basis to the finance company, which will review and periodically audit the reports.

In addition to providing working capital and enabling owners to maintain business control, alternative financing may provide other benefits as well:

It’s easy to determine the exact cost of financing and obtain an increase.
Professional collateral management can be included depending on the facility type and the lender.
Real-time, online interactive reporting is often available.
It may provide the business with access to more capital.
It’s flexible – financing ebbs and flows with the business’ needs.
It’s important to note that there are some circumstances in which equity is a viable and attractive financing solution. This is especially true in cases of business expansion and acquisition and new product launches – these are capital needs that are not generally well suited to debt financing. However, equity is not usually the appropriate financing solution to solve a working capital problem or help plug a cash-flow gap.

A Precious Commodity

Remember that business equity is a precious commodity that should only be considered under the right circumstances and at the right time. When equity financing is sought, ideally this should be done at a time when the company has good growth prospects and a significant cash need for this growth. Ideally, majority ownership (and thus, absolute control) should remain with the company founder(s).

Alternative financing solutions like factoring, A/R financing and ABL can provide the working capital boost many cash-strapped businesses that don’t qualify for bank financing need – without diluting ownership and possibly giving up business control at an inopportune time for the owner. If and when these companies become bankable later, it’s often an easy transition to a traditional bank line of credit. Your banker may be able to refer you to a commercial finance company that can offer the right type of alternative financing solution for your particular situation.

Taking the time to understand all the different financing options available to your business, and the pros and cons of each, is the best way to make sure you choose the best option for your business. The use of alternative financing can help your company grow without diluting your ownership. After all, it’s your business – shouldn’t you keep as much of it as possible?

What We Have Here Is A Failure To Communicate

The results of this past election proved once again that the Democrats had a golden opportunity to capitalize on the failings of the Trump Presidency but, fell short of a nation wide mandate. A mandate to seize the gauntlet of the progressive movement that Senator Sanders through down a little over four years ago. The opportunities were there from the very beginning even before this pandemic struck. In their failing to educate the public of the consequences of continued Congressional gridlock, conservatism, and what National Economic Reform’s Ten Articles of Confederation would do led to the results that are playing out today.. More Congressional gridlock, more conservatism and more suffering of millions of Americans are the direct consequences of the Democrats failure to communicate and educate the public. Educate the public that a progressive agenda is necessary to pull the United States out of this Pandemic, and restore this nations health and vitality.

It was the DNC’s intent in this election to only focus on the Trump Administration. They failed to grasp the urgency of the times. They also failed to communicate with the public about the dire conditions millions have been and still are facing even before the Pandemic. The billions of dollars funneled into campaign coffers should have been used to educate the voting public that creating a unified coalition would bring sweeping reforms that are so desperately needed. The reality of what transpired in a year and a half of political campaigning those billions of dollars only created more animosity and division polarizing one extreme over another.

One can remember back in 1992 Ross Perot used his own funds to go on national TV to educate the public on the dire ramifications of not addressing our national debt. That same approach should have been used during this election cycle. By using the medium of television to communicate and educate the public is the most effective way in communicating and educating the public. Had the Biden campaign and the DNC used their resources in this way the results we ae seeing today would have not created the potential for more gridlock in our government. The opportunity was there to educate the public of safety protocols during the siege of this pandemic and how National Economic Reform’s Ten Articles of Confederation provides the necessary progressive reforms that will propel the United States out of the abyss of debt and restore our economy. Restoring our economy so that every American will have the means and the availability of financial and economic security.

The failure of the Democratic party since 2016 has been recruiting a Presidential Candidate who many felt was questionable and more conservative signals that the results of today has not met with the desired results the Democratic party wanted. Then again? By not fully communicating and not educating the public on the merits of a unified progressive platform has left the United States transfixed in our greatest divides since the Civil War. This writers support of Senator Bernie Sanders is well documented. Since 2015 he has laid the groundwork for progressive reforms. He also has the foundations on which these reforms can deliver the goods as they say. But, what did the DNC do, they purposely went out of their way to engineer a candidate who was more in tune with the status-quo of the DNC. They failed to communicate to the public in educating all of us on the ways our lives would be better served with a progressive agenda that was the benchmark of Senators Sanders Presidential campaign and his Our Revolution movement. And this is way there is still really no progress in creating a less toxic environment in Washington and around the country.

Impact Of Nutrition On Nations Produtivity And Healthy Growth

Nigeria has greatly improved socio-economically unlike her past years. The problem of malnutrition still cut across some of her citizens. She has been long hobbled by political instability, corruption, inadequate infrastructure and poor macro-economic management. This has led her to over dependence on the capital-intensive oil sector, which provides 20% of GDP, 95% of foreign exchange earnings, and about 65% of budgetary revenue. But certain governmental and economic reformation has brought about a lot of improvement ranging from an estimated increase in her GDP from $430 per capita in 2003 to $1,000 in 2005. Reducing the unemployment rate from 3.2% in 1997 to 2.9% in 2005. The adoption of micro-finance banking, and bank liquidation and consolidation by the CBN, resulted in the rating of Nigerian banks as one of the best in Africa. The peak of the whole thing was the historic debt-relief of $30 billion worth from the $37 billion own by Nigeria to the Paris Club in March 2006.In spite of all these recent development, 70% of Nigerians are still under the alienating hands of malnutrition and 60% in 2000 below poverty line. I have categorized the Nigerian nutritional problem for the sake of clarification into undernutrition, overnutrition and micronutrition. The purpose of this article is to review the government effort and also suggest ways of emanating the country from the alienating hands of poverty that threatens the country’s future.NUTRITIONAL PROBLEMS.
Though the three nutritional problems make up a summary of the country’s problem of malnutrition, it will be good to review the whole problem one after the other. Undernutrition is of the greatest nutritional problem that stricken mostly people in the rural areas and some of those who went to the city in search of greener pasture. Undernutrition is characterized by inadequate intake of macro-nutrients (namely: calories and protein). According to the president Obasanjo, “almost half of children ages 7+-13 in Nigeria are underweight”. A lot of children and adults go to bed starved, some take one meal a day and most of these meals are carbohydrates. This leads to malnutrition and protein deficiency. It is the main cause of kwashiorkor which is more unique to people living in the tropical African region. For adults, the Recommended Dietary Allowance (RDA) for protein is 0.79g per Kg (0.36g per 1b) of body weight each day. For children and infants this RDA is doubled and tripled, respectively, because of their rapid growth. This is the root cause of stunted growth and deformation in growing children. One-fifth of Nigerian children die before the age of five, primarily from millions of Nigerians are also living below one dollar a day, others live by begging for food on the streets.Overnutrition is mainly the problem of adults and few adolescents especially the urban dwellers. It is a rapidly escalating public nutrition problem, principally reflecting shift in dietary patterns and more sedimentary lifestyles. The situation in Nigeria where economy favor a particular group than others, the poor gets poorer while the rich gets richer had brought about a higher percentage of overnutrition- Nigerian big man disease. This nutritional problem is now in an alarming rise in diet-related chronic disease such as type II diabetes, hypertension, cardiovascular diseases and several diet-related cancers. These chronic diseases accounted for human suffering, social distress, loss of productivity, and economic burden to the health and other economic sectors. The increase in population obsessed in the country affects the country’s labour force and the productivity of the country both at present and in the near future.The last but not the list is micronutrient deficiencies. It is the inadequate intake of key vitamins and minerals. It is both experienced by the poor and the rich, rural and urban dwellers. It is hunger hidden under the guise of sufficiency in Nigerian society. Lack of vitamins and minerals results in irreversible impairment to child physical and mental development. That is why this type of malnutrition is centered on pregnant women and children. According to some empirical conclusions, it is observed that even moderate iodine deficiency during foetal development and infancy has been shown to depress intelligence quotient levels by 10-15 points. Folic acid deficiency is linked to serious birth defects. Inadequate iron affects children’s growth and learning ability, and reduces their ability to concentrate, fully participate in school and society interacts and develops; it also contributes to material mortality and lowered workforce productivity. It is on record that 40% of children under 5years of age suffers vitamin A deficiency.The three major nutritional problem in Nigeria place a great challenge on the country’s faltering economy has led to declining imports of costly protein-rich food, oil and animal feed. Many parents now abandon the task of breast-feeding and all this and many others contribute to the risk of malnutrition in Nigeria and more so now she is undergoing a rapid socioeconomic revolution.GOVERNMENT ACTION PRIOR TO DEMOCRACY
Nigeria economy was dominated by Agriculture and trade, which flourished during the colonial rule in 19th century. In 1960s and 1970s the petroleum industry developed and prompted greatly increased export earnings and allowing massive investments in industry, agriculture, infrastructure and social science.The sharp decline in oil prices, economic mismanagement, and continued military rule characterized Nigeria in the 1980s. In 1983, the U.S. Agency for International Development (USAID) began providing assistance to the Nigerian Federal and State Ministries of Health to develop and implement programs in family planning and child survival. In 1992, an HIV/AIDS prevention and control program was added to existing health activities USAID committed $135 million to bilateral assistance programs for the period of 1986 to 1996 as Nigeria undertook an initially successful Structural Adjustment program, but later abandoned it. Plans to commit $150 million in assistance from 1993 to 2003 were interrupted by strains in U.S.-Nigeria relations over human right abuses, the failed transition to democracy, and a lack of cooperation from the Nigerian Government on anti-narcotics trafficking issues. By the mid-1990s, these problems resulted in the curtailment of USAID activities that might benefit the military government. Existing health programs were redesigned to focus on working through grassroots Nigerian non-governmental organizations and community groups.In 1987, The International Institute of Tropical Agriculture (IITA), under the principal Researcher Dr Kenton Dashiell, launched an ambiguous effort in Nigeria to combat widespread malnutrition. They encouraged the use of nutrients, economical soybeans in everyday food. They further said that soybeans are about 40% protein-rich than any of the common vegetable or animal food sources found in Africa. With the addition of maize, rice and other cereals to the soybeans, the resulting protein meets the standard of the United Nations Food and Agricultural Organization (FAO). Soybeans also contain about 20% oil, which is 85% unsaturated and cholesterol free. Though a lot of nice programs for malnutrition alleviation started at this period, there were a lot of other socio-economic thorns that hindered the popularity and proper functioning of these programs till the democratic period. The economic instability within this period favored malnutrition to a great extent due to autocratic government. There was little or no in-depth effort to fight malnutrition. The period can be identified as the egoistic period- when the governmental private interest dominated at the expense of the suffering masses.THE LATER INTERVENTION
The most interesting part of this period is that it is characterized by promise and hope. Promise which is the chief working tool of this period and hope ever present to sustain the promise. The president Obasanjo in 2002 meeting with the president International Union of Nutritional Sciences promised to support a better coordination of nutritional activities and programs in Nigeria, he further said, “the high prevalence of malnutrition is totally unacceptable to this government and he assured the IUNS president that he would do everything possible to ensure that resources are available to improve household food security, greater access to healthcare services and better caring capacity by mothers including support for breast feeding promotion.On the 27th September 2005, Nigerian president chief Olusegun Obasanjo lunched the Nasarawa state school feeding program at the Laminga primary school. The program is fully funded and administered by the state of Nasarawa, which makes it a unique model in Africa today. The epoch making event is in fulfillment of one of the promises of combating malnutrition especially among children whom he observed that many at the age of 7-13years are underweight. He further promise to reach out about 27million children during the coming 10years.Other international bodies like the World Health Organization (WHO), The United Nation International Children’s Fund (UNICEF), The United States Agency for International Development (USAID) which began in 1992 but took more root during democratic regime. All of them and many more are fighting acidly to eradicate poverty and malnutrition.There are a lot of challenges that exist in some nutrition improvement programs. There is the need for the government to place some nutritional research into the national policy. They should be able to reach out to the nook and cranny of the country. They should be able to coordinating all the sectors of anti-malnutrition agencies. A more effective intervention is very much needed.Nutrition is now an interventional issues a stake and as well the unavoidable duty of each nation. Though it is difficult to bring solution to every man’s door but the government should try as much as possible to reach people through, mobile agencies, and mass media. There should be a lot of effective research conducted in the nation to be updated with information such as; average government investment in nutrition per capital, current statues of nutrition deficiencies, and information on nutrition initiatives, as well as national policy frameworks and interagency coordination mechanisms. There is need to promote nutritional organisation especially, non-governmental organisation. The government should try to improve the socio-economic life of the people. Agriculture should be encouraged and improved in the country. There should be a check on the nutritional value of every product both imported and non-imported product. The Government should promote a global nutrition agenda, which would increase nutrition’s visibility at national levels and beyond.If these above suggested solution would be taken into account, Nigeria would improve to a heavy extent as the giant of Africa and future giant of the world economy, thereby clearing the future storm of economy facing Nigeria because of some of her citizens suffering from nutritional problems.