Entrepreneurs spend years turning dreams and passions into realities. When the time comes for the hard work to truly become a growth business and funding is required, most people assume that because they are in rapid growth mode, selling equity is the only way to truly scale their business. Would you give up 25-30% of your blood, sweat and tears if you don’t have to? We don’t think so. Would you give up control if you didn’t have to? We don’t think so.
If the need is for working capital, then why give up part of your company through equity when you can flexibly grow with your company through factoring or borrowing on your accounts receivables? (Side note: if you can’t figure this out then you need a new CFO or advisor. This is not a complex formula, yet many business owners don’t have a clue about this very important piece of info. We are happy to help you on this if need be. Don’t skip this step; do the math!)
We’re not impugning equity. Depending on your company, equity may be completely appropriate, but most of the time, using asset-based lending or factoring will help you bootstrap to the point where you have way more leverage with angel investors and equity providers. Your valuation “discussion” will be so much easier having grown on your own efforts. If you can wait, the difference in your ownership position will be greatly increased.
Otherwise, when a timing problem exists, fix your only need: working capital financing via leveraging your purchase orders, inventory and accounts receivable.
At Far West Capital, we believe in maximizing the value of an entrepreneur’s ownership interest. We want to help you grow your company while you maintain control of it. If you take credit cards, then you understand the value of getting your money quickly. Factoring and asset based lending is more often than not less expensive and easier than taking credit cards or other business loans.
Here is an example of a client in the beverage business, where Far West Capital helped the company owner avoid unnecessary dilution of their dream:
The company was going to raise $1,000,000 by selling 25% of the company, but instead, because they only had a working capital issue to solve, they utilized purchase order financing and factoring. Three years later, the company’s annual revenue is $5,000,000 and is worth four times revenue. Today, that sold equity would be worth $5,000,000 and the cost of factoring has been less than $250,000. Which solution would you choose? Through factoring or asset-based lending, 0% of the company was sold and the cost is a small variable percentage of sales that you can get rid of at any time.
Although it’s not something you will read about in the local business journal, putting an additional $4,750,000 in the owner’s pocket is pretty newsworthy.
Far West Capital will put out over $600,000,000 in financings in 2013 to over 175 clients. Please call us today to find out how we can help you Unleash Your Potential.