Category Archives: Small Business Financing

5 Golden Rules of Pitching Your Business

If you’re starting a business, the truth is you’ll need to get funding. Last month, I reviewed the sources of funding for small businesses. Regardless of your sources of funding, you’ll need to follow the five golden rules of pitching your business so you can get the funding your small business needs.

5 Golden Rules of Pitching Your Business Continue reading

10 Reasons Your Small Biz Should Accept Credit Cards

If you’re like me, you’ve run into more than one disappointment while shopping. The worst is when what you want is so close you can feel it – but you can’t buy it. You find that perfect item, get up to the cash register, hand over your credit card anxious to walk away with your find, and then feel your heart sink as the cashier states, “We don’t accept credit cards here.”

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Small businesses eager to grow their sales miss out on opportunities every day because they choose to only accept cash. If you have pondered getting a credit card machine for your small business, here are 10 reasons to stop hesitating and go buy one today:

1. Put Money in Your Pocket Faster.

No matter what type of small business you run, you need the cash flow to keep your doors open. When you take IOUs from loyal customers, or hope that someone will leave and then come back to make a purchase, you delay payment (and sometimes never get the sale).

2. Make Your Accounting Easier.

Keeping track of all of that cash is a hassle. It puts the burden on you to manage where cash came from, how much you earned, and track down those customers who are late on payment. When you take credit card, you instantly get a digital record of where your money came from. You can also track who owes you money by uploading delayed payments into an invoicing system.

3. Attract More Customers.

I am one of the40% of consumers that carries $20 or less in my pocket. 9% don’t carry any cash at all. When you send those cashless customers back out the door in search of an ATM, the chances of them returning to you are not great. You miss out on sale after sale by limiting your customers on how they can pay.

4. Legitimize Your Small Business.

You know you are trustworthy and run a perfectly honorable organization, but you’re your customers might not. “Cash only” sometimes says “less than professional” to some customers. That’s not the signal you want to send. Putting up a sign that shows you accept credit card immediately builds trust among your new and existing customers.

5. Customer Satisfaction Skyrockets.

Your customers carry credit cards for a reason. Most people have a Visa or Mastercard in their wallet. Fewer have Discover or American Express. No matter which brand of credit card your customer prefers to use, keep them happy by gladly accepting payment with it. Want to go the extra mile? Start acceptingGoogle Wallet orPayPal payments online too!

6. People Buy More From You.

If a customer knows you only take cash, they will automatically limit how much they can spend in your store. When you take credit card, the sky – or their bank account balance – is the limit. The more obstacles you free up for your customers, the more likely they are to increase their purchase amount from you.

7. Your Investment is a Small Drop in the Bucket.

Compared to how much more money you will make by accepting credit cards, the investment in the hardware and processing fees is a small price to pay. The cost of accepting credit cards is minimal for today’s small business owners. Lower your credit card processing fees by using on-the-go devices, such asSquare. You will not notice the small amount of fees you incur compared to the influx in sales.

8. Maintain Positive Cash Flow.

Depositing cash in your bank account or waiting for checks to arrive in the mail takes a long time. The more cash and check transactions you accept, the longer you delay positive cash flow coming into your bank account. Processing payments digitally changes all of that, placing money in your small business account within a matter of hours, instead of days.

9. Expand Your Business Reach.

You have plenty of customers who are willing to pay with cash. Imagine if you could expand your business reach, and also attract a new customer base who prefers to pay with credit card? When people know you accept credit cards, they are more likely to walk through your doors and buy from you.

10. Avoid Failure in Your Small Business.

Did you know that90% of small business failure is directly connected to cash flow issues? That alone proves the importance of maintaining a positive cash flow, encouraging larger purchases, and making it easier for your customers to buy.

The bottom line is, if you want your small business to prosper, it only makes sense to accept credit cards.

Image: PhotoSpin

Equity Crowdfunding 101

Crowdfunding in general—and equity crowdfunding in particular—is set to become the primary way in which small businesses will finance their launch and growth in the twenty first century. Last week we gave a brief overview of the different types of crowdfunding on offer, but today, we’re going to delve deeper into the concept of equity crowdfunding.

In a nutshell, equity crowdfunding is a new method of seeking financing that allows companies of all sizes, including startups, to raise funds through secured online platforms, giving them access to large numbers of qualified investors. Equity crowdfunding gives companies (otherwise known as issuers) an attractive option for raising funds, and provides investors with the possibility of a handsome return on their investment.

What exactly is equity crowdfunding?

With equity crowdfunding, the investors become a shareholder in the company. An investor owns shares in a company that may provide the investor with benefits such as the right to vote at shareholder meetings, entitlement to dividends out of the company’s profits (if declared), and the investors get to share in the value in the company when shares are sold. Of course this means that they run the same risks that any investor faces when owning shares in a company, in that the company may fail or its value may decline.

Equity crowdfunding offers investors and companies great new options for buying into and funding new business ventures, as up until now there has really been no precedent for non-professional investors to invest in innovative ideas and potentially yield good returns. This makes the growing popularity of equity crowdfunding particularly exciting for busuness owners and investors alike.

Who can invest?

There can be two types of investors in equity crowdfunding—accredited investors and non-accredited investors.

  • Accredited investors are those investors deemed by the securities commissions to be high net worth individuals who would not be catastrophically impacted financially if an investment in a company seeking funds through equity crowdfunding fails. Each country has its own parameters, but roughly the top 3 to 5 percent of a country’s population would qualify as accredited investors. Typically both the issuers and the equity crowdfunding portal used must confirm the investors’ qualification with the local securities rules.

  • Non-Accredited investors are the “rest of us”—the rest of the country’s population that do not meet the requirements to be registered as an accredited investor.

What is an equity crowdfunding portal?

Equity crowdfunding portals bring companies and investors together in a secure cloud-computing platform. There are portals providing investment opportunities for accredited investors and non-accredited investors. Equity portals will also vary on size of offerings and vertical industry sectors. Issuers exchanges shares (or securities) for investors’ money via a selected equity crowdfunding portal. Currently in most North American jurisdictions only accredited investors can invest in equity crowdfunding—although there are a handful of exceptions to that rule.

Don’t miss the next instalment to our Introduction to Crowdfunding series, “How to Prepare for Equity Crowdfunding”.

 

Crowdfunding: An Introduction

By Stefanie Neyland with research by Oscar Jofre

You may have heard a lot about crowdfunding recently, and you may be wondering what it’s all about. If you’re not quite sure exactly what it is, have no fear—you’re not alone. The truth is that crowdfunding is a relatively new concept, and many entrepreneurs are only just beginning to learn about it and how it can be leveraged to start or grow their business venture.

So what is crowdfunding? On its most basic level, it’s the aggregation of small amounts of capital from a large group of people, usually via the Internet, in order to fund a business, project or organization. There are four main types of crowdfunding:

Equity-based crowdfunding

Equity crowdfunding is considered by most to be the holy grail of the crowdfunding phenomenon that’s sweeping the globe. For the past 24 months there has been a frenzy of tweets, blogs, articles, and news reports about how entrepreneurs and small businesses can access capital via equity crowdfunding. Investors receive a stake (usually common or preferred shares or units) in the company (the issuer), with the idea being that the investor is either looking to make a return from dividends or capital gains on the growth in value of their stake in the company. In a nutshell, it’s a method of seeking financing that allows companies of all sizes (including startups) to raise funds through secured online platforms, giving them access to large numbers of qualified investors.

Donation-based crowdfunding

With donation-based crowdfunding, contributions go towards a charitable cause. For example, you may pay for a charity in a poverty stricken area to receive much-needed medication for its inhabitants. In donation-based crowdfunding, funds are collected from a community for a publicly disclosed initiative but there is no financial return to the people putting money in. The return for contributors is usually the satisfaction that comes with helping others in need.

Lending-based crowdfunding

With this type of crowdfunding, investors are repaid for their investment in a business over a period of time and receives a stipulated return (interest) for the use of their money.

Reward-based crowdfunding

With reward-based crowdfunding, contributors receive a predefined product or service in return for their funds provided to the company or individual. A contributor advances funds with the promise of receiving a prescribed reward at a later date (i.e., paying now for the development of a new smartphone and receiving the phone after it is developed, manufactured, tested and shipped).

Whether it’s in Canada, Brazil, Chile, China, Italy, Japan, Ireland, Israel, Russia, Sweden the United Kingdom, Australia, the Netherlands or the United States, Equity Crowdfunding is changing the global landscape to give everyone—the ‘crowd’—an opportunity to invest and contribute in a variety of initiatives.

To learn more about how crowdfunding—and more specifically, equity crowdfunding—could help you start or grow your business, download our free eBook, ‘Equity Crowdfunding 101’ via the Free Tools section of the BizLaunch website.

 

The Pros and Cons of Small Business Bank Loans

Nobody likes to ask for money but as a business owner, sometimes—often times—it is necessary. You can ask people you know but being on the hook to loved ones is not only awkward but also puts them in the position of having to break one of those unwritten rules: Don’t lend money to family and friends.

For businesses further along in their growth, venture capital or angel investors might be an option but even in a recovering economy, getting a meeting with them is difficult.

Bank loans are still the funding method of choice for small-business owners but if they are new to you, consider the pros and cons before applying.

Why Bank Loans are Popular

Bank loans come with autonomy. The lending officer might ask you about your plans for the funds but once the bank approves the loan, they won’t be concerned with how you use it unless it’s a large loan for a specific purpose.

Next, you don’t have to give away part of your company. If you were to partner with a venture capitalist or angel investor, the standard terms include giving away a portion of your company. For young companies, that portion (known as equity) could be higher than 50 percent.

Finally, the terms are better. In the beginning, you might have financed your company with your credit card. That came with high interest rates and a limited credit limit. Bank loans often have lower interest rates, higher credit limits, and as you build your small business credit file, paying back a bank loan carries more positive weight than a credit card.

The Drawbacks

You’re going to have to make it through the application process. Because the bank is taking all of the risk, it will want to know a lot of detailed information about you and your business. The bank will want to see your financials, revenue projections based on sound data, information about other investors and their stake in your company, and operating documents.

Especially if your company is small and young, the bank will want to know about you. Be prepared to disclose everything about your family finances. Then, much like a meeting with investors, you’ll have to answer some tough questions. (And, you’ll need really good answers.)

Banks are cautious in light of the credit crisis that is still fresh in lenders’ minds.

It’s likely that the bank will require you to personally guarantee the loan. If your company defaults, you may lose your home, your car, investment portfolio or other valuables.

Take Action

Despite the drawbacks, banks are still the best source for small business funding. Before you apply for a loan, talk to various lenders about their terms, interest rates, and various types of business loans.

Finally, make plans for the future. This is where being the hopeful optimist can be your downfall. Before applying for a loan, ask yourself what will happen if business slows down? What if the economy has an effect on your business that is outside of your control? Can you still make your loan payments even if business slows?

Don’t take on a loan that relies on your business performing at its peak in order to make the payments.

For more information on small business funding, check out our webinar, 10 Tips for Raising Finance.

Crowdfunding 101

Have you exhausted the bank loan avenue? Tired of knocking on the doors of venture capitalists and angel investors? Do you need money to grow your small business but don’t know where else to look?

Enter: crowdsourcing! Crowdsourcing is the latest, greatest thing since sliced bread, kids. It allows ordinary people to invest in small businesses and startups!

Okay, my false commercial voice is done. If you haven’t heard of crowdfunding, it’s worth a look. With crowdfunding, a company can post a project that it wants to raise money for (even something like actually get its products into production). It sets its financial goal and then spreads the word. Regular, everyday folks like you and me can invest at little as $5. Continue reading