Business owners looking for investment capital need to understand the value of what those dollars represent. When you sell off parts of your company and gain new partners and shareholders, they don’t want to learn you are paying the electric bill with their investment. In other words, getting equity money is a long hard fight involving a lot of time and resources. The investors need to know that the business is run properly, meaning, you know capital priorities. And capital priority number one is – improve shareholder value. Every dollar should be used to build the value of the company. Paying bills does not increase shareholder value.
Here is where invoice factoring is very useful. By utilizing accounts receivable financing you are not taking on any net term liability (and decreasing value), and you can put the cash flow to work paying bills, thus protecting the investment kitty. A factoring company takes into account the burn rate associated with venture backed companies and can still put the funding in place. Keep the eye on value, and use receivable factoring as the necessary financial tool to keep the momentum growing.