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?

Tips on What You May Need When Travelling – Travel Bags and Accessories

Many people enjoy travelling and will always do so at any available opportunity. Some people travel often because it is part of their job requirements. There are those who rarely travel but will gladly do so once in awhile especially during vacations. When leaving your home for a night or more, it is always very important to take along with you everything you need to make yourself as comfortable as possible for the period you are away from home. Also take with you everything you need to fulfill the purpose of your travel, such as things you may need if you are on official/ business trips. If you forget something you would have taken for your travel, it may not only frustrate you but also sour your spirit, You may even incur extra expenses because you may be forced to buy something you would otherwise not have bought. So it is important you plan ahead and decide what you need for your journey and what kind of suitcase or luggage bag will be most suitable for your journey. What you may need for your journey and the type of travel bag you will need depends on the length of time you will be away from home and also the mode of your travel. What you may need for a business trip will be different from your needs when going for a vacation. When you have made a good mental recollection of what you need for your travel and your mode of travel (travel by air or drive yourself to your destination), you then have to decide on the type of travel bag to pack your things in. You have to choose the type of suitcase or travel/ luggage bag that will give you the greatest flexibility and allows you to travel light.Traveling With Luggage Bags /Garment Bags for Official/ Business TripsMost people prefer to fly if they are travelling for official or business purposes such as attending business meetings or going for conferences. In this case you may be spending a night or two away from home, then your best choice of travel bag may be a carry-on bag with wheels or a messenger bag. The messenger bags and rolling bags are available in many sizes ranging from 13″ to 21″. Each of these travel bags lets you travel light because you can fit your computer into your travel bag. The unique design of each bag allows you to comfortably store your notebook/iPad in addition to clothing and personal accessories in the same bag. Each bag has special overnight luggage section that provides enough room for the clothes you need while on your journey. Each bag is perfect for short official/business trips. Each type of carry-on case has all necessary notebook case features including a zip-down workstation with storage for your mobile accessories, pen loops, key clip and business card holder. The rolling carry-on bags have smooth-rolling wheels and telescoping handle that makes the rolling case a perfect companion for the businessperson on the go.Some people may prefer to travel with a garment bag, computer /notebook carrying case or a multipurpose handbag (for women). The garment bag is great for protecting clothes while traveling. The clothes stay neat and wrinkle free. The garment bag has multiple pockets and can hold up to 4 garments. It has four interior pockets that provide enough room for shoes and accessories like cosmetic/makeup bags, toiletry bags and curling hot iron cases. It also has one exterior pocket where you can put the book you want to read on the plane or any other thing you want to be handy while you are on the plane. This garment bag is very stylish, lightweight and durable. It has full-length center zipper that gives you easy access to the inside. It also has full exterior zipper closure that ensures that everything inside the bag is secured. When you have packed everything you want inside the bag, you can fold the garment bag into two. The bi-fold bag has two handles that makes it easy to carry. It also has a metal hanging hook that allows you to hang it on a wall. You can then use your multi-purpose handbag or computer/notebook carrying case to carry your computer/iPad.Some other travelers may prefer to travel with an overnight bag. The overnight bag has zippered main closure with three zippered side pockets and two Velcro end pockets. It has adjustable shoulder strap and carrying handle. It also has a black linen inside lining that makes it great for wiping out and keeping clean.Travel Accessories- Snoozer – Travel Neck Pillow / Blanket in VeluraBeside the travel/ luggage bags that you need to pack everything you need for your journey, you may consider other travel accessories such as a luxurious Velura covered neck rest that not only carries a soft, easy care Velura 40″ x 60″ blanket inside, but also has an inflatable pillow that allows you to enjoy a warm and comfortable trip. The PVC inflatable pillow is easy to inflate and deflate and the blanket is so soft that it easily folds back into the pillow cover. This snoozer-travel neck pillow/blanket in Velura is a compact, easy to carry travel item that you can use to provide comfort for yourself on any journey. This travel accessory is ideal for business or recreational travelers.What You May Need When going on Family VacationMany families choose to travel by road when on a family vacation; Travelling together in a car is part of the close family experience that every family cherishes and long for every year. Preparing for this long travelling experience for the families can be a sweet challenge for parents, especially when the journey involves very young kids. The thought of how to keep them engaged and entertained all through the long journey can also be daunting.It is no brainer to say that you need suitcases to pack the family’s clothing and needs while on vacation, The challenge is what type of suitcases do you need. Do you need a suitcase for everyone in the family or do you need to put everyone’s clothing in a common suitcase? Depending on the number in the family and the ages of the kids, you may have a common suitcase for clothing and another for other accessories. Alternatively, each kid can pack his/her accessories in his/her backpack, while you have a common suitcase for everyone. In another arrangement, you can let everyone in the family use a garment bag to pack both his/her clothing and accessories. This is one of the “sweet-bitter” choices parents have to make.Use A Thermal Cooler Bag to Pack Enough Cold Drinks For Everyone While On The JourneyDepending on the length of the journey you might want to travel with enough cold drinks packed in a thermal cooler bag. The thermal lining of the cooler bags prevents the drinks from absorbing heat as such the drinks will remain cold for a very long time. The idea is for you not to stop to buy cold drinks each time any member of the family wants something cold to drink. Having sufficient cold drinks handy when you need them gives you enough driving time and also lets you stop only when you need to break the journey for any other thing other than just buying some cold drinks.Make Your Kids Comfortable With Kids’ Travel AccessoriesBesides having enough drinks handy for anyone who needs it during the journey, it can also be a challenge to keep the kids comfortable during a very long journey. You can keep your kids comfortable all through the journey by allowing them to use kids’ travel accessories such as travel buddies. Kids’ travel buddies are ultra soft neck pillows that allow kids to snuggle with their buddy while “visiting the land of dreams!” These buddies that are available in different animal characters are perfect for strollers, cars and any other place kids drop off to sleep.Scosche backSTAGE pro II Vehicle Mount for Tablet PCApart from providing cold drinks for your kids when they need them and making them (kids) comfortable while they sleep during the journey, keeping the kids engaged during the course of the journey is another challenge. Some parents allow the children to read their books during the journey, and play their video games when they are tired of reading. These are good ways to keep your kids engaged. Another way is to have them watch videos/movies on iPad while you drive. In this instance, backSTAGE pro II is very suitable. Use the backSTAGE pro II to securely and rugged mount your iPad 2 to the back of any headrest so that your children can enjoy hands free viewing of movies, apps, games while you drive. This device is ideal to keep your family entertained with ease when you are on a long journey. The backstage pro II has a charger that plugs directly into the headrest mount and provides a continuous charge to your iPad 2. It has wireless IR headphones for private listening and a USB port that supports flash drive use for viewing images.These are some of the things you need to consider when preparing for a business trip or family vacation, to ensure that you have the most comfortable journey whether you travel by air or travel by road with your family on a vacation.

S&P 500 Biotech Giant Vertex Leads 5 Stocks Showing Strength

Your stocks to watch for the week ahead are Cheniere Energy (LNG), S&P 500 biotech giant Vertex Pharmaceuticals (VRTX), Cardinal Health (CAH), Steel Dynamics (STLD) and Genuine Parts (GPC).

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While the market remains in correction, with analysts and investors wary of an economic downturn, these five stocks are worth adding to watchlists. S&P 500 medical giants Vertex and Cardinal Health have been holding up, as health-care related plays tend to do well in down markets.

Steel Dynamics and Genuine Parts are both coming off strong earnings as both the steel and auto parts industries report optimistic outlooks. Meanwhile, Cheniere Energy saw sales boom in the second quarter as demand in Europe for natural gas continues to grow.

Major indexes have been making rally attempts with the Dow Jones and S&P 500 testing weekly support on Friday. With market uncertainty, investors should be ready for follow-through day breakouts and keep an eye on these stocks.

Cheniere Energy, Cardinal Health and VRTX stock are all on IBD Leaderboard.

Cheniere Energy Stock
LNG shares rose 1.1% to 175.79 during Friday’s market trading. On the week, the stock advanced 3.1%, not from highs, bouncing from its 21-day and 10-week lines earlier in the week.

Cheniere Energy has been consolidating since mid-September, but needs another week to forge a proper base, with a potential 182.72 buy point formed on Aug. 10.

Houston-based Cheniere Energy was IBD Stock Of The Day on Thursday, as the largest U.S. producer of liquefied natural gas eyes strong demand in Europe.

Even though natural gas prices are plunging in the U.S. and Europe, investors still see strong LNG demand for Cheniere and others.

The U.K. government confirmed last week that it is in talks for an LNG purchase agreement with a number of companies, including Cheniere.

In the first half of 2021, less than 40% of Cheniere’s cargoes of LNG landed in Europe. That jumped to more than 70% through this year’s second quarter, even as the company ramped up new export capacity. The urgency of Europe’s natural gas shortage only intensified last month. That is when an explosion disabled the Nord Stream 1 pipeline from Russia that had once supplied 40% of the European Union’s natural gas.

In Q2, sales increased 165% to $8 billion and LNG earned $2.90 per share, up from a net loss of $1.30 per share in Q2 2021. The company will report Q3 earnings Nov. 3, with investors seeing booming profits for the next few quarters.

Cheniere Energy has a Composite Rating of 84. It has a 98 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share price movement with a 1 to 99 score. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 41.

Vertex Stock
VRTX stock jumped 3.4% to 300 on Friday, rebounding from a test of its 50-day moving average. Shares climbed 2.2% for the week. Vertex stock has formed a tight flat base with an official buy point of 306.05, according to MarketSmith analysis.

The stock has remained consistent over recent weeks, while the relative strength line has trended higher. The RS line tracks a stock’s performance vs. the S&P 500 index.

Vertex Q3 earnings are on due Oct. 27. Analysts see EPS edging up 1% to $3.61 per share with sales increasing 16% to $2.2 billion, according to FactSet.

The Boston-based global biotech company dominates the cystic fibrosis treatment market. Vertex also has other products in late-stage clinical development that target sickle cell disease, Type 1 diabetes and certain genetically caused kidney diseases. That includes a gene-editing partnership with Crispr Therapeutics (CRSP).

In early August, Vertex reported better-than-expected second-quarter results and raised full-year sales targets.

S&P 500 stock Vertex ranks second in the Medical-Biomed/Biotech industry group. VRTX has a 99 Composite Rating. Its Relative Strength Rating is 94 and its EPS Rating is 99.

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Cardinal Health Stock
CAH stock advanced 3.2% to 73.03 Friday, clearing a 71.22 buy point from a shallow cup-with-handle base and hitting a record high. But volume was light on the breakout. CAH stock leapt 7.3% for the week.

Cardinal Health stock’s relative strength line has also been trending up for months.

The cup-with-handle base is part of a base-on-base pattern, forming just above a cup base cleared on Aug. 11.

Cardinal Health, based in Dublin, Ohio, offers a wide assortment of health care services and medical supplies to hospitals, labs, pharmacies and long-term care facilities. The company reports that it serves around 90% of hospitals and 60,000 pharmacies in the U.S.

S&P 500 stock Cardinal Health will report Q1 2023 earnings on Nov. 4. Analysts forecast earnings falling 26% to 96 cents per share. Sales are expected to increase 10% to $48.3 billion, according to FactSet.

Cardinal Health stock ranks first in the Medical-Wholesale Drug/Supplies industry group, ahead of McKesson (MCK), which is also showing positive action. CAH stock has a 94 Composite Rating out of 99. It has a 97 Relative Strength Rating and an EPS rating of 73.

Steel Dynamics Stock
STLD shares shot up 8.5% to 92.92 on Friday and soared 19% on the week, coming off a Steel Dynamics earnings beat Wednesday night.

Shares blasted above an 88.72 consolidation buy point Friday after clearing a trendline Thursday. STLD stock is 17% above its 50-day line, definitely extended from that key average.

Steel Dynamics’ latest consolidation could be seen as part of a larger base going back six months.

Steel Dynamics topped Q3 earnings views with EPS rising 10% to $5.46 while revenue grew 11% to $5.65 billion. The steel producer’s outlook is optimistic despite weaker flat rolled steel pricing. STLD reports its order activity and backlogs remain solid.

The Fort Wayne, Indiana-based company is among the largest producers of carbon steel products in the U.S. It engages in metal recycling operations along with steel fabrication and produces myriad steel products.

How Millett Grew Steel Dynamics From A Three Employee Business

STLD stock ranks first in the Steel-Producers industry group. STLD stock has a 96 Composite Rating out of 99. It has a 90 Relative Strength Rating, an exclusive IBD Stock Checkup gauge for share-price movement that tops at 99. The rating shows how a stock’s performance over the last 52 weeks holds up against all the other stocks in IBD’s database. The EPS rating is 98.

Genuine Parts Stock
GPC stock gained 2.8% to 162.35 Friday after the company topped earnings views with its Q3 results on Thursday. For the week GPC advanced 5.1% as the stock held its 50-day line and is in a flat base.

GPC has an official 165.09 flat-base buy point after a three-week rally, according to MarketSmith analysis.

The relative strength line for Genuine Parts stock has rallied sharply to highs over the past several months.

On Thursday, the Atlanta-based auto parts company raised its full-year guidance on growth across its automotive and industrial sales.

Genuine Parts earnings per share advanced 19% to $2.23 and revenue grew 18% to $5.675 billion in Q3. GPC’s full-year guidance is now calling for EPS of $8.05-$8.15, up from $7.80-$7.95. The company now forecasts revenue growth of 15%-16%, up from the earlier 12%-14%.

During the Covid pandemic, supply chain constraints caused a major upheaval in the auto industry, sending prices for new and used cars to record levels. This has made consumers more likely to hang on to their existing vehicles for longer, driving mileage higher and boosting demand for auto replacement parts.

Fellow auto stocks O’Reilly Auto Parts (ORLY) and AutoZone (AZO) have also rallied near buy points amid the struggling market. O’Reilly reports on Oct. 26.

IBD ranks Genuine Parts first in the Retail/Wholesale-Auto Parts industry group. GPC stock has a 96 Composite Rating. Its Relative Strength Rating is 94 and it has an EPS Rating of 89.