Shaking The Money Tree – There Are Many Options for Finding Cash for Your Strapped Business
April 19, 2006
Money. Money. Money. Whether it is start up capital, cash flow injection or purchasing power, every business needs money.
Cash is “King.” We all have heard the saying, and it is never more true than when dealing with the management of a business. Cash is not the same as cash flow. It is money in the bank or in business accounts. It is not tied up in inventory, accounts receivable or real estate. Cash is readily available to pay the bills, employees and suppliers.
If the flow of cash out of the business is greater than the flow of cash into the business, the signs on the wall show that the business is in poor financial health. Negative cash flow can sink a business, as you need money to operate. When this happens, it is time to shake the money tree.
Think of the money tree as a big one with a split in the trunk and lots of branches all around it. One side of your tree deals with equity financing and the other side leads is debt financing. When you are looking for money, your business’ debt-to-equity ratio – the relationship between dollars you have borrowed and dollars you have invested in your business – is extremely important. The more money you have invested in your business, the easier it is to attract financing. A high ratio of equity to debt will send you along the debt financing side of your money tree; likewise, a high debt to equity ratio will send you out seeking sources of equity financing in the other direction. Whether it is for start up capital or funds needed to keep a business going, getting money costs a business something.
In equity financing,…
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by: Julie A. Dialessi-Lafley, Esq.
March 20, 2006