Debt Financing vs. Equity Financing for start-ups and SMEs March 30, 2012

Entrepreneurs looking for funding for their start-up business can choose out of a variety of financing options. All of these financing options can broadly be categorized into – Equity Financing & Debt Financing, both of which come with their unique set of pros & cons for the entrepreneur.

While debt financing allows entrepreneurs to acquire loans from any government agency or institute, equity financing on the other hand involves, exchange of capital for a piece of ownership in the entrepreneur’s business. This type of financing typically includes angel investors & venture capitalists (VC’s).

DEBT FINANCING

Debt financing requires the entrepreneur to repay the borrowed money to the lending institute. This may include everything from a loan to bond, credit or even IOU. An important consideration with this kind of funding option is that, it requires the entrepreneur to have exceptional credit history.

Pros:

• This is looked upon as the best source of financing mostly by companies with steady growth, consistent sales & solid collateral.
• Debt financing can be obtained from Small Business Administration, commercial banks, etc.
• Here the entrepreneur gets to maintain his ownership & maximum control over business.
• The best part is that, debt financing interests are tax deductible.

Cons:

• Debt financing requires monthly payments on a regular basis.
• This sort of financing is most often limited to businesses with a solid & successful track record.
• This requires the filing of formal application either online or at the lending institute.

EQUITY FINANCING

Equity financing seeks ownership in company in exchange for money lent. This kind of financing option can prove extremely useful for start-up businesses or companies that need to raise additional equity for paying off existing debts. They however, need to display a potential to harvest large returns on investments.

Pros:

• This is looked upon as the best source of financing mainly by companies with high profitability or those with poor credit ratings.
• An ideal finance option for small start-ups that lack a solid track record.
• Equity financing can be obtained from credit cards, property equity, savings, friends & family, etc.
• Here entrepreneurs can obtain quick funds without having to worry about incurring debt.

Cons:

• The involvement of more number of investors can mean more loss of ownership control.
• Venture Capitalists or angel investors may opt to have a say in every important business decisions.
• Filing of application form is needed only for VCs & angel investors and never for friends & family.

Considering these pros & cons of debt & equity financing, it is for the SME to decide which form of financing would be best suited for their individual business needs.

 If you need assistance in debt or equity finance visit smegetmoney.com

 

 

Angel Investors – a solution to funding for start-ups and SMEs in India February 28, 2012

Angel investors get their name not because of some halo or golden wings that they have but because they literally serve as “business angels” (early stage investors) for start-up and small businesses, by providing them with capital and strategic assistance they are unlikely to find with other traditional investments. Angel investors are a blessing in disguise for businesses looking for greater returns.

Most often, angel investors are successful entrepreneurs who are a generation ahead in building successful companies & who wish to support the growth of a new business, by providing start-up capital while expecting a percentage of ownership equity as its return. One major reason angel investors are picking up popularity in India and other countries is because, in addition to providing entrepreneurs with financial capital, these Angels may also offer intellectual capital for entrepreneurs to shape and create their business and connect to resources, without actually becoming a part of the operations.

Though many believe that angel investors are difficult to find in India, estimates indicate that there are over 250,000 angel investors presently active in the country funding almost 30,000 start-ups a year.

smegetmoney.com – This is a portal which understands that finding equity funding for start-up and small businesses can be a tedious process. Thus, SME Get Money is aimed at connecting start-ups and SMEs with the right investors including angel investors to help them get equity funding within no time. What gives this portal an advantage over other similar portals is the fact that, it not just helps SMEs get funds but also aids them in finding profitable places to invest their own surplus funds as an ANGEL.

 

 

Working Capital Financing – Quickest, Easiest & Safest Finance Solution for SMEs February 10, 2012

For the small & medium enterprises to function smoothly and have a constant growth in future, there is a need for continuous organized finance, that too from a reliable source. While it is a known fact that risks & speculations will always be an integral part of a growing business, successful entrepreneurs are those who keep funds available to back their strategies in order to undertake such risks.

Business experts indicate that, in order for your company to grow beyond defined boundaries, forecast the trends of future markets, create a commendable infrastructure, run successful marketing & promotional campaigns and simply pay off debts, dependable working capital finance is required.

Given the present business scenario, the key to a growing & successful business is to align it with the latest technologies. However, while applying techno-friendly strategies would accelerate the productivity & work flow of the company & help it get an edge over its competitors, incorporating these technicalities would also require a considerable amount of investment on your part and for that, what you require is a working capital boost.

For any startup business to reach out to its target audience & create a long-lasting impact, an effective promotional and marketing campaign is a must. The thing to note hear is that, even if you have been in the business for a long time, still in order to ensure that you do not take a backseat in the minds of people, it is important for you to continue with your promotional campaigns. Since, most of these campaigns are expensive; you again require a continuous working capital.

A part & parcel of every business whether new or old, is Debt Management. In order to ensure that you are not overburdened with debts at any point of time, it is important that you repay your debts at regular intervals. This ideally would require a continuous cash flow.

These are some business demands & needs that are bound to spring-up irrespective of the fact that you are a startup or an established company. This is where Working Capital Financing proves extremely useful for the entrepreneurs. Quick finance for meeting all these demands can easily be availed within 72 hours of application, that too without any application fee or collateral or any personal guarantee.

The most interesting thing about working capital finance however is its repayment scheme. Unlike other kinds of capital finances, working capital finance does not follow a fixed repayment schedule. It is only when a sale is made, that a certain amount automatically gets deducted from it as the repayment of the capital. For the loyal customers who are regular with their repayments, there are special programs & incentives.

Thus, in case you are looking for a spry financing option to meet the demands of your business, do not forget to consider working capital financing as the easiest & safest finance option and send  a request on https://docs.google.com/a/smejoinup.com/spreadsheet/viewform?hl=en_US&formkey=dERxVkQ5YjJtbWRueEowMURWTmZqOHc6MQ#gid=0 or email us on getmoney@smejoinup.com 

When is the right time for SMEs to look for equity February 20, 2011

Okay, we all know equity investment is the most popular way around the world for businesses to raise money. Companies seek funds and in turn, they relinquish part of the shares of the company to the lender or the group of lenders. What that means is businesses seeking equity
funding forego a part of the control over the company in exchange for funds.

It has been seen that SMEs who have gone for equity funding at the wrong time have had to pay the price for it. But what exactly is the right time for SMEs to go for equity funding? The following pointers can help SMEs decide better on whether to go for equity funding or
bide their time:

1.Don’t do it too soon- If you have just tasted the entrepreneur rush, chances are you would be all excited about getting equity funding four months into your business. But that could spell trouble for you. When excess money is infused into a business too soon, it
invariably leads to wasteful expenditure. And most SMEs spend on extra manpower, even when they can do with fewer people. Soon, they realize that they are running an overstaffed start-up, leading to complex processes and a whole lot of confusion.

Advice- Build your business for sometime first, build your customer base, get some profits going and then look for equity funding.

2.  Are you ready to let go of the control- Now, this decision rests solely with the SME owners. Are they ready to let go part of the control over their business in return for funds? Or are they looking to have all the control and call all the shots? Making this decision can be a
little dicey for SMEs, especially ones who are looking to expand. But your end-means must be kept in mind while taking the decision.

Advice- If you are looking to build a long lasting brand, you may as well wait till the business reaches the desired level, before you relinquish the control. If you are looking to build a company that you would want to sell for a quick profit, equity funding could be well suited to you.

3. Is it long term or short term you are looking at- The time for equity funding for an SME also depends on whether the
SME is looking for long term funding or short term finance needs. According to popular wisdom, if the company needs short term finance, for example- in the case of web start-ups looking to expand their team, they might be better off looking for alternative funding options. However, if the company is in need of long term financing, for example- in the case of a software company researching on a new product, equity funding could be the best option to go forward.

Advice- For long term funding and funding required in phases, go for equity funding; for short term financing needs, go for alternate funding options.

4.  Your growth plans- The whole purpose of equity funding is to raise capital. An SME owner or the decision maker would be
in the best possible position to gauge the company’s growth plans and whether substantial amount of capital would be needed. For example- if an SME is looking to make a foray in a new market, it would need extra manpower to handle the research, develop the product or services and come out with an effective marketing strategy. In such a case, equity funding might be needed since it’s a major expansion that the company is undergoing.

However, if an SME is expanding on the workforce front because of increasing customer base, equity funding might not be the wisest option, since the increased customer base could handle the bulk of the expenses. But then again, there are no hard and fast rules to it. Most of the times, entrepreneurs go by their instinct. It’s always wise to read and hear what the experts say, but the ultimate decision rests
with the SMEs themselves. If they have the conviction about the need for equity funding, they should go for it, although it may be contrary to the pointers above.

If you are looking for Equity funding fill up your request on below link

https://docs.google.com/a/smejoinup.com/spreadsheet/viewform?hl=en_US&formkey=dERxVkQ5YjJtbWRueEowMURWTmZqOHc6MQ#gid=0