Bennett Financial Services

There are a variety of ways to finance business operations including selling equity, offering debt instruments, securing mortgages and loans, factoring, and getting an asset based loan from any one of a variety of companies in this business.  Your company’s ability to secure the financing that it needs, the choices of sources for getting that financing, and the cost of doing so largely depends on the financial health of the company. 

There are several things to consider in choosing the type of financing that you decide to use.  Selling equity through the offering of common and preferred shares will mean that you are giving up some degree of ownership of your company.  Thus, in the case of common shares, you are allowing those share owners to have a say in how you run your business and to share in the distributed profits.  In the case of preferred shares, it will require you to pay off those obligations before the common shareholders can receive a dividend.  The advantage of selling equity to secure financing is that the company does not have to pay these investors until management decides to distribute profits through a declaration of a dividend.  This can be a significant advantage in managing the company’s cash flow.

Offering debt securities such as corporate bonds will mean that you will have to honor those interest payments, otherwise the debt holder can take legal action.  However, you will not be giving up any ownership of the company, and you may not have to give up any control over management decision making.

The issuance of common shares, preferred shares and corporate bonds does require the company to satisfy numerous regulations from regulatory bodies; however, a competent full service securities firm will be able to assist you in this regard.

Mortgages that use real estate as security can be obtained through your local bank or mortgage broker.  Depending on the strength of your company, you may be required to provide personal guarantees.  Your corporate lawyer should be involved in this process.

Lines of credit and general business loans against the value of your company can be obtained from your bank.  These are usually easier to arrange and they are a very convenient way to handle day to day cash-flow needs.

A number of companies offer specialized loans such as factoring and asset based loans.  Factoring is the process of selling your invoices or accounts receivable to a Factor (the company offering the loan) for immediate cash.  The Factor will immediately advance to you an agreed upon percentage of invoices that you provide.  They will then collect the invoice from your customer and remit the balance due to you upon payment by your customer.  Similarly, these companies offer asset based loans for purchasing inventory or equipment.  In this case the inventory and equipment secures the loan.  In addition, purchase orders and expected advances such as Scientific Research and Experimental Development Tax Credit Advances, can be used to obtain funds.  These kinds of loans are often used for companies for start ups, when a company is experiencing a high rate of growth, that have large accounts receivables, that have significant purchase orders but little working capital, for operational turnarounds, financial restructurings, acquisitions, and management buy-outs.

As you can see there are several ways to obtain financing for you business; ensure that you contact the appropriate firm to secure the financing that your company needs.