Small Business Finance Finds a New Working Model

Today’s blog is brought to you by guest blogger Andrew Miller.

That the old days of nothing but brick-and-mortar businesses are gone isn’t really news to anyone. The era of online business has been here for a while, and even though it hasn’t necessarily been the silver bullet that some hoped for, it looks as though the online business world is going to be a part of lives for the foreseeable future.

While the shift to online business has affected virtually every sector, we’re starting to see some new activity in the way small online businesses seek out financing. As a number of lenders (many of which are new businesses in their own right) look to finance the latest online start-ups or new technology companies, they’re using an entirely different way of providing funds than ones we’ve seen in the past.

One of these financiers taking a different approach to how they do business is B.J. Lackland, CEO of Lighter Capital.

“‘We’re investing in growth initiatives, marketing initiatives,’ he [Lackland] said. It’s the kind of investing that often draws angel backers. But Lighter, instead of claiming equity in a company, loans cash based on revenue, taking a percentage of revenue as its fee.

“Loans take longer to pay off if a company’s revenue shrinks and are settled more quickly if a company has a big month. That, Lackland said, aligns Lighter’s interest with those of the companies it finances.”

—Upstart Business Journal

Companies like Lighter have given a number of small online businesses (and brick and mortar businesses, for that matter) the chance that banks simply weren’t willing to offer. Entrepreneurs who simply don’t have the background or capital banks are looking for or who just can’t afford to take on the kind of debt many bank loans lead to, are finding alternatives.

Financing Your Small Business

If the movies have taught us anything, it’s that start-ups and tech companies are all started by young go-getters who want nothing to do with the old corporate model (down with dress codes and cubicles!). Of course, that’s not how real life works at all. A number of new small businesses are actually started by Baby Boomers approaching retirement. The reasons for going into business later in life vary, but regardless of reasons, you need to be fully prepared when taking the step to start your own business.

Whether you’re quickly approaching 65 or you’ve been out of college for three minutes, you need to fully understand your financial situation and your finance options before taking the plunge. Some advice given to Canadian Boomers looking to go into business for themselves can apply to American entrepreneurs, as well:

“Focus on financing for your small business: Whether you are just starting out or looking to grow your business, cash flow—including access to capital and credit—is critical for success. Start by accurately projecting start-up costs and business expenses and learning about the financing solutions available to you.”

—Equities

It might never to be too late or too early to start your own business . . . as long as you understand that the world of small business financing has changed, and your options could be very different than they were just a few years ago. Be sure to always consult an experienced business attorney and CPA before entering into any funding agreement.

What finance methods have you used to start your business?

 

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You can find Andrew Miller at Google+ and Twitter: @amillerblog