There May Be No More Angel's in Your Outfield

Ran across an interesting post today on The Huffington Post from the Kauffman Foundation. In the piece, written by Robert E. Litan, the vice president of research and policy at the Foundation, he describes potential impacts to those entrepreneurs raising funds from angel investors.

From the article:

Tucked away in a few pages in the comprehensive financial reform bill outlined by Senate Banking Committee Chairman Senator Dodd (D-Conn.) are provisions that would raise the costs of angel investments in startup ventures. These provisions are both unnecessary and unhelpful at a time when policymakers should be looking for ways to make it easier to finance new businesses, especially the potentially high-growth, job-creating companies capable of attracting outside investors. Under existing law, startup companies can raise money easily and quickly from "accredited investors" -- individuals with substantial wealth or income.

There is no need for the companies or the investors to gain approval from any state or regulatory official. All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.

While the angel community is investing in deals, there are lots of opportunities for wealthy individuals other than just entrepreneurs, such as the distressed real estate marketplace. As an entrepreneur and an angel investor, the last thing we need is more roadblocks placed on the raising of funds from these angel investors.

Own Your Venture

Thanks to our friends at the Kellogg School of Management for sending information on Own Your Venture to us. The site has a very neat interactive tool that, according to the website, “Makes understanding the impact of raising money for an early stage venture transparent and easy to grasp. It is intended to take some of the confusion out of raising angel or venture money. The audience for this tool is broad, but we hope it will find its way into the hands of founders in particular, those who are just beginning to make decisions about how to finance their companies---simplifying the process so that they can focus on their big idea.”

Tips for Improving Your Cash Flow

Here is a guest post from Arthur Maur about financing your business.

Three New Methods for Speeding Up Financing...Tips for Improving Cash Flow in Small Businesses. The benefits of getting money into your business as fast as possible are endless, which is why you should always encourage customers to start making their payments in a timely fashion. However, there are always going to be a few accounts that have a lag between payments. Keeping your business's cash flow moving is important, and one way to achieve this is to borrow money against the business's receivables.

Here are three different methods of doing so that may work in your situation.
1. Factors: There are three main benefits to using factors. Cash is delivered immediately upon shipping. The factor is responsible for following up with accounts receivable, not you. Protection against bad debts is also often offered by using a factor.When using factors, you agree to sign over all receivables to them, and receive a credit line in exchange. The prime rate, plus an extra amount usually around 3 percent, is your responsibility to pay. The factor will take care of all accounts receivable you've signed over, as well as other services like mailing and bookkeeping. Your customers only know the factor as an accounts receivable agent.Be sure to check on the background of the factor before agreeing to work with them. Speak to other clients of any prospective factor to be sure they are professional and complete all work on time.

2. Invoice Discounters: Similar to a factor, the invoice discounter is more temporary and takes on only case at a time from your business. A contract must be made between the business and the discounter to cover some or all of the future transactions. This means that when an invoice is issued, you contact the discounter to ask them to purchase it. If it's valid, they agree and within 48 hours you have the cash your business needs, minus the percentage the discounter takes. This percentage depends on the length of the time the receivable will be outstanding. The longer it is outstanding, the more the discounter takes.

3. Banks: Banks are another good option for financing through your receivables. Unlike the other two options, banks consider your receivables collateral. This means you will still be responsible for collecting from your customers. The loans will also show up as debt on financial records, which can be avoided by using a factor. Factoring your receivables is considered a straight sale.However, you may want to consider financing through a bank as they often charge a lower interest rate than other methods. It also builds rapport between you and the bank, which can come in handy if you need a larger loan. Increasing the line of credit without a new application is another benefit to bank lending. Once you've made new sales you'd like to borrow against, it's as simple as contacting the bank with the new information.

Canadian government grants.