Accounts Receivables Financing Instead of Angel Investors
Accounts Receivable financing is a very good alternative to angel investment you have a number of clients that owe you money on an ongoing basis. This financing provides you with a moderate cost form of capital that does not require a personal guarantee or a sale of equity to a third party Sometimes, it is in your best interest not to work with an outside angel investor if you have a number of accounts receivables that can be sold to a third party. Most angel investors high net worth individuals that are always seeking to obtain a substantial portion of your business. This specific type of financing is most appropriate for established companies. In some cases, a private investor may be able to provide you with the capital that you need while having you pledge your accounts receivables as security for the angel investor.
Hard money is a less expensive alternative to working with angel investors especially if your clients have a strong track record of paying their bills on time. In some instances, you may be able to finance your business through accounts receivables if you’re already in operation. Most venture-capital firms operate on much larger scale than angel investor networks and they do not provide accounts receivable financing as it carries a significant amount of risk to the individual funding sources. Your CPA can assist you with calculating the anticipated ROI for your business and the ROI for accounts receivable financing if you are working with an outside funding source.
If you have a large number of clients that pay their bills on time then you may want to investigate this type of financing rather than seeking to sell a portion of your business to a third party investor. In the long run, this type of capital is far less expensive than work with a private investor or other type of capital funding source.
In many of our future articles, we are going to investigate the benefits of working with an accounts receivable financing firm as it pertains to the type of capital that you may need. As always, we strongly recommend that you work closely with your certified public accountant as it pertains to your cash flow needs before you obtain capital at a higher cost than is needed. Your CPA can provide you with a comprehensive cash flow analysis that will clearly showcase your ability to repay any type of debt or equity financing that is associated with your business while concurrently providing you with a number of options that are available outside of private financing from a third party individual.