Essentially you are giving title to your Receivables to a third party in exchange for a discounted rate on the total sale plus a deposit on each transaction leaving you with anywhere from 70-90% of the total sale. Usually, the third party has recourse to charge back the amount paid to you if the customer fails to pay their bill.

If the customer doesn’t pay their bill, you have to give back the money advanced to you in the entire amount. This puts you out even more than the original amount of the bill. Remember, you paid the factoring company a discount to use their money.

Factoring companies are still concerned about your credit worthiness, but are willing to extend money more liberally than other sources because they have title to the debt from other businesses and are likely to collect their exposed amount.

Ultimately, I am not a fan of factoring as it cuts too far into the profit margins of a company, and most companies who make a good profit are not in need of services like this. Think of factoring as the business equivalent of payday loans. Once you get in, your profit margins go down, if you have profit margins.

The alternative is either Raising capital through equity sales to cover your Cash-flow needs which is the best way to protect profit margin, or to get a business loan through a bank or other sources.

Make sure you spend time with your CPA discussing factoring before entering into any agreement. It could be what puts you out of business, when you think it will be the solution to saving your business.

They are more likely connected to research such as health, energy or other specific areas where businesses are not likely to invest because too significant of a financial risk.

Other areas where business grants may be available are in economic development in targeted areas in state and local Government.

If you are thinking of pursuing a business grant, you need to first identify what’s available to your industry.  Organizations that would likely have knowledge of available business grants include Colleges and Universities, Your Chamber of Commerce, local business incubators and state economic development agencies. You should also check with industry specific associations that are in your local area.

If you are able to locate a business grant that would apply, you need to find an experienced business grant writer to help you complete the application process which can be and usually is quite extensive.

Business Grants may have criteria that you don’t know about, and is not revealed outside the grant writing committee which is one more reason why you need a business grant writer to be successful at securing these types of funds.

Other concerns for business grants include restrictions that may be imposed in order to receive funds, such as requirements for specific wages and a certain number of new jobs created. You may not be able to make critical changes to your business because you would violate the business grant contract and then be forced to return funds. The bottom line is you need to be very methodical when dealing with this type of funding.

You should also know that business grants often take years to complete and may not be worth the time to secure this type of money for business needs. The time you spend may outweigh the amount of potential funds you would receive.

Venture Capital is most often used for growth after a model is proven, but sometimes can be used for acquisitions of weaker companies, merging them together to create a new stronger healthier company.

If you are a start-up business that has not received funding prior to reading this, you most likely would not qualify for funding from a Venture Capital or institutional fund. These funds tend to invest in late stage 2^nd or even 3^rd rounds where the business model has been proven out and the business needs capital to scale.

Venture Capital funds typically look for business that is scalable and offers high growth with substantial returns. The funds will purchase investments in several companies to spread the risk of the investment. They typically have experienced business people including CPA’s and executives with experience in startup and high growth companies to monitor the investments.

Venture Capital Funds often have specific mandates that the money be invested in certain industries or in geographic locations targeted by investors. This usually happens through non-profit corporation investments which may be mandated by State or Federal Government.

Venture Capital Rounds take considerable time for funding to complete, once the fund has said they will invest. They may tell you as soon as three months, but quite often it can take 6-12 months to complete funding from your first conversation. Start talking to them as early as possible and plan for the longest time to get to money.

It is not uncommon for these funds to ask for preferential treatment such as a board seat or a special offering to be made that gives the VC firm a preferred class of investment stock. They may even ask to place their own executive staff picks inside your business. You have to ask yourself if the money is worth allowing an outside entity to essentially take control of your business.

If you need immediate funding, you should first look at doing a business loan and then look for Angel Investors who are willing to seed the company.

The company brings borrowers and lenders together. Unlike a normal banking relationship, this company is a facilitator of individuals and funds that want to make loans to people who are credit worthy, but might not have the capital to secure a normal bank loan.

Each loan may have a number of investors who opt to fund the loan. They each take a portion of the risk, which makes this unique to a bank loan, which assumes all the risk.

The biggest determination on securing a loan depends on your credit score. That’s why you should pull your credit report, along with a credit score to see what information is being reported about you. The company is looking for individuals with a credit score of 640 or higher. The higher the score, the better the rate you will get for your loan.

Even though you are borrowing the money for business, you’re loan through the company will be a personal loan. That means, should your business fail you would still be liable to pay for the remaining balance on the loan.

Loan payments are reported to the credit bureaus under your personal credit and not your business. Remember, this is actually a personal loan that lenders permit to be used for business purposes.

When you apply, you submit a request and your credit score is checked and then you will fill out a profile telling what you intend to do with the money you are borrowing.

Lenders will review your profile and then decide if and how much of your loan that they would like to fund. You will be able to watch the progress as your loan is funded.

Try it out and get the money you need today.

Angel Investors make their own decisions when deciding which companies that they wish to invest in. They don’t rely on groups, which are funds or Venture Capitalists.

They make their investments often by their belief in the Entrepreneur to succeed in making the business work. They do expect to see business plans and projections, in most cases, executive summaries are sufficient for them to make decisions.

The Angel Investor often makes a decision quickly. Angel Investors can change their minds quickly, so you need to be working to source new Angel Investors until you have secured all the funds you need for your business.

They are likely to be hands off, opting to give you the money for business needs and then relying on your updates to give them an idea of where your business is at.

Angel investors are friendlier to entrepreneurs that have had several starts. Failures tend not to bother Angel investors as much as you might think. They see it as the entrepreneur having been humbled and learned lessons that they don’t know everything that they think they might. Of course, it helps to have had several successes under your belt.

Angels tend to want to get into a business very early in the funding so that they get the best purchase price and as much ownership of the business as possible. They may take pride and actually brag about their investment in your company to others which may help you to raise additional funds.

Be careful though and do not share investor information unless the investor explicitly gives you permission to use their name. You may find this working against you and having potential investors avoid the attention.

Angel Investors often expect Entrepreneurs to have skin in the game. You can do this by investing your own money first, which helps you maintain greater control of your company, or taking out a business loan to seed your business.