Not All Money is Created Equal
We came across an interesting article recently which presented the interesting notion that money is not all equal. This notion refers to not the monetary value of the bill itself, but rather the source of the money. Consider the sources of your financial capital while we discuss the major points of this interesting article.
Debt vs. Equity
Financial capital can be categorized as either debt or equity. Generally, banks and business function on debt while investors deal mostly with equity. What kind of money are you obtaining? What are your other options? Remember that equity gives the investor a percentage of future profits and requires surrendering ownership.
Though you may not realize it, certain types of financing reduce your control. Deciding to incorporate investors or partners will reduce the freedom you have in making decisions and therefore reduce your control. Some lenders may request or require financial oversight and input on a project. This will change the way things are done and you may run into a few obstacles. It is important to be mindful of control when making financial decisions.
The security details involving your finances should be taken into careful consideration when choosing between financial opportunities. How is your financial capital secured? If it is, has the lender or investor explained in thorough detail (in writing) how it is secured? Is there a lien on your assets? What are the procedures if a payment is defaulted?
Do not forget about the future when making financial decisions for your business. If you happen to leave the company, can you transfer the capital to the next business owner? Is the capital for you or is it for the business?
Ease of attainment
How easy is it to acquire this financial capital? How much time will be required to secure the capital? Do you have the time to wait? Usually, the “quick –fix” remedies will end up costing you much more.
Obtaining financial capital can sometimes be the most difficult aspect of starting a new business venture. As we’ve discussed, it is important to keep in mind that the monetary value of the loan is not the only thing that matters! There are lots of other factors to consider when choosing the best financial capital option for your business. For financial and bookkeeping services, trust the experts at Behm Bookkeeping. Our finance professionals are ready to help you succeed today!