Capital Ideas – Business Financing in a Rising-interest-rate Environment
June 19, 2006
Business funding has become more challenging lately as rates are on the rise and venture capital seems to have dried up. Yesterday’s obvious funding solutions may seem to be a pipe dream as banks and investors become reluctant to take the same risks that have resulted in reduced profits. Consequently, today’s small to mid size businesses have to be more creative in their quest to find the financing that will allow them to prosper. Companies that can show increasing revenues and have stable management teams remain a good risk for financers.
Traditional banks are often the best starting point for business financing. However, this is a time when tunnel vision is not appropriate. If financing is necessary to achieve one business goal, it is possible that other concurrent needs may also be appropriately addressed. Packaging total needs and shopping the package to the most likely financer can open the lines of communication with loan officers and flush out the ceiling in the deal. Often businesses find that a combination of loans and lines of credit can be satisfactorily negotiated to accomplish the task.
It is likely that a business’ total funding needs may be beyond the scope of a single bank’s capabilities however. This is when it is time to start thinking out of the box. One of the most popular scenarios is to seek out private financing. This comes in many forms, and careful consideration of the options can usually produce at least one viable option. Family, friends and the original investors in a business may be tapped for an influx of cash, however this is not a time for handshake deals. Future expansion and a potential influx of funding from banks…
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by: Gary G. Breton , Esq.
May 29, 2006