Angel Investors

Using their own money, angel investors specialize in providing financial backing for small-business
owners and entrepreneurs during the startup phase and beyond. These investors can sometimes mean
the difference between an idea becoming an empire or never getting off the ground. You know how real
estate investors purchase up tons of land? Angel investors are very similar, only they deal in ideas and
businesses.

The Pros and Cons of Angel Investors

All funding comes with risks, however. For example, seed investors can result in you having to report to
numerous stakeholders. Unlike seed investors, a sizable loan from the bank means you’re only held
accountable by the bank. But a bank loan often translates into hefty interest rates and in many cases,
less money than you’d get from an investor.

Like other forms of financing, angel investors have their own pros and cons. Let’s take a look.

Pro: Angel investors are willing to take risks

Angel investors are often established entrepreneurs who understand the degree of risk involved with
establishing a small business. Unlike banks, angel investors aren’t afraid to throw investment capital at
an idea that seems like it has potential. This is generally the result of several things:

They have an investor network and can get multiple people to invest.

They’re well-versed in business development and have the foresight a bank lacks.

Because of their entrepreneurial background, they know a good investment opportunity when they see
one.

They have private equity to spare and don’t have the same concerns as a bank.

Con: Angel investors may set the bar higher

An angel investor’s higher risk tolerance may come with the expectation of a high return. They’re in
business to make money, and when there’s a substantial amount of capital on the line, they’re going to
want to see a payoff. It’s not unheard of for angel investors to expect a rate of return equaling 10 times
their initial investment within the first five to seven years. An unhappy angel investor could mean no
more funding from them in the future.
Again, with a bank you’d be paying interest every month on your loan. This is simply the tradeoff you
make by going with an angel investor. There’s no interest now, but the angel investor comes with the
expectation that their angel capital will grow into something larger.

In short, the pressure to deliver can be intense.

(Hey, angel investors became wealthy individuals with large net worths by being smart and aggressive.)

Pro: The money isn’t a loan

When you take out a small-business loan, the bank expects you to pay it back, regardless of whether
your venture actually succeeds. Angel investors operate under a different set of rules. They provide you
with the money you need to get going and, in exchange, they get an ownership stake in the business. If
your startup takes off, then you both reap the financial rewards. If the business fails, the angel investor
doesn’t expect you to pay them back.

Note: This does mean the angel investor might have an exit strategy in place if things aren’t looking
good. The wrong decisions can doom early-stage companies very early on. In which case, the remainder
of the angel investment might be pulled.

Con: There are strings attached

Even though you’re not technically obligated to repay the investor the money they chip in, there’s a
catch. When you hand over equity in your company as part of the deal, you’re essentially giving away
part of your future net earnings. The percentage of ownership an angel investor asks for typically
depends on how much they’re investing.

If you expect your business to be wildly successful, it could add up to a lot of money you won’t be able
to claim. When you’ve got an offer on the table, review the terms carefully to make sure the amount of
ownership the investor is requesting doesn’t infringe on your own ability to make a profit.

Pro: Your odds of success increase

Typically, angel investors bring years of experience to the table, and they already know the ropes when
it comes to starting a company. (Remember, these are often people with numerous business ventures
under their belt.)

If you’re seeking advice and guidance in addition to funding, an angel investor may offer a wealth of
valuable knowledge. With the right angel investor and mentor, you could end up a part of the next
generation of angel investors.

Con: You’re not in total control

Because angel investing comes with so many risks, some angel investors may want partial control over
your company as well. Seasoned venture capitalists may see a great opportunity in your business but
may also want more say in how things are operated.

Even if they leave the reins in your hands, you may have to explain the reasons behind your choices.

Quick tips for securing an angel investor

If the pros and cons sound fair to you and you’re still interested in finding an angel investor, you’re in
luck. Securing an angel investor is no walk in the park, but it’s also not impossible in the age of social
media and networking.

Follow these tips and you could be on your way to finding the investor you need.

Create your dream angel investor

Before you do anything, it’s important to have an idea of what kind of angel investor you want. Is this
person involved in numerous industries or only yours? How much money are you looking for? What kind
of control are you prepared to give this person?

These are all questions you need to answer ahead of time, so you’re ready when you’re on the spot.
Join an angel network

There’s a social media network for everything. Angel investors are no different. There are numerous
angel networks out there, from Angellist to more regional networks based in your city or state.

Join a few and see what kinds of people are posting in them. If you feel good about one of the networks,
start building some relationships and see if you find the right person.

Find a local angel group

Unlike online angel networks, local angel groups can have less competition and be more personal
(unless you’re in a major hub like New York, in which case you may want to branch out).

Find a local angel group and go to a few of their gatherings. Then see if you hit it off with any potential
investors.

Consider equity crowdfunding

Equity crowdfunding is the act of sourcing numerous investors or funds, generally online. Think of this
like Kickstarter, but in the more general startup investing sense. Equity crowdfunding can be a great way
to raise capital quickly. Be warned though: just like seed investors, this can result in you having
numerous people to report to, and increase the stress you’re under.

Angel investing: Is it worth it?

Launching a business is hard work from the moment you draft a business plan to the day you open the
doors of your new business. Finding an angel investor is no different. It takes hard work, networking,
and some sacrifices.

Still, finding your business angel could mean your new venture gets the chance to take flight — all
without the tradeoffs that come with being a public offering. (You don’t want to worry about pleasing
shareholders already, do you?)
Remember: angel investing is a high-risk gamble for the investor, so be prepared to make some
sacrifices if you decide to go this route. Do your due diligence when vetting investors. Don’t sell yourself
short: Wait until a worthy individual comes along. You’ll know when you’ve found the right person. And
when you do, it’s all worth it.

Venture capitalist

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RAISING CAPITAL

The Pros and Cons of Venture Funding

By Kathryn Hawkins December 12, 2011

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An instant infusion of cash is an enticing business proposition, but is accepting money from outsiders in
your best interest? Consider the following pros and cons before seeking venture funding or angel
investments:

Pro: The money is yours to keep. VC and angel investors are gambling on your business. If it succeeds,
they win big; if it fails, they eat their losses. Unlike with a bank loan, you have no obligation to repay VC
funds. If you go under, you won’t have investor debt hanging over your head.

Con: Your investors own a stake in your company. Even though you don’t need to repay VC funds, the
money comes with strings attached. Investors give you money in exchange for an equity share in your
company. This dilutes the number of shares you hold and can offer future shareholders. Depending on
the amount of shares granted, you may be giving investors the right to make controlling decisions about
your company.

Pro: Venture capital can help your company grow quickly. Without VC funds, you may have to wait for a
steady revenue stream before you hire additional staff or purchase expensive equipment or technology.
With an extra $500,000 or $1 million, you’ll be able to take your company to the next level immediately.

Con: Your company may not be ready to grow. If you accept outside funding before you figure out how
to make your business profitable on its own, you could end up spending money on hires and expenses
that won’t help your company in the long run. Scaling too early and investing too heavily in resources is
the primary reason that startups fail.

Pro: VCs can connect you to other business leaders who can help you. Venture capitalists are successful
entrepreneurs in their own rights, and they tend to have contacts that other businesspeople would kill
for. VC investors have a stake in your success, so it’s in their interest to help you network with anyone
who might be able to help your business become more profitable.

Con: Raising funds is an arduous process. Company founders often spend a considerable amount of time
perfecting their pitch, shopping it around, and dealing with multiple follow-up meetings. To see whether
you have the stomach for fundraising, read SEOmoz CEO Rand Fishkin’s tale about his failed attempt to
secure venture funding for the already-profitable company.
The Pros and Cons of Small Business Loans

Cashflow can be a challenging detail to manage in your business, which is why it can be helpful to have
credit cards and/or a line of credit available to get you through the lean months. The way you structure
the credit should depend on the needs of your company and the financing options that are available. For
example, small business loans might work for some people, but others prefer to use credit cards.

Small Business Loans: Getting Started and Business Growth

There are two points when a small business loan can be quite valuable to your business:

Getting Started: When you are trying to get the company off the ground, cash is needed to help you get
things rolling. Some people have personal funds that are put into the business, but this money will only
get you so far. Not only do you need money for marketing, website design, inventory, and more, but you
need to be sure there is enough cash to keep you going in the beginning. Small business loans can be
used upfront so that you can get your company launched. The bank that provides the loan will use your
personal credit score and reputation in determining the amount of money that is available and the
terms of the loan.

Future Growth: If you have an established business, you might face cashflow issues when it is time to
grow. Expansion requires money, which can make it a tricky situation to navigate if you don’t have the
cash in the bank. Future growth is much easier if you have a loan to tap into for the funds that are
needed. This money can be used for business development, marketing, inventory expansion, and more.

Sometimes, the loan is structured as a set dollar amount that is paid to your business, and then you can
use the money as you see fit. Another common option is to use a small business line of credit. This
solution works similar to a credit card with a balance that can go up and down over time. The difference
is that cash is available to ensure that you have the money when it’s needed.

What Do Lenders Want?

Small business loans aren’t automatically handed out to every person who has a business idea. When
you talk to the bank, they will determine the risk of the loan and how much money will be available. The
goal is to ensure that you will be able to pay the loan back in full. So, the lenders will be looking for a few
key points to ensure that you are a safe and reliable customer.
Since the primary concern of the lender is that the loan is paid back in full, they are going to look at your
personal credit history and track record. If you want to qualify for a business loan, then it is helpful to
have a good personal credit score to show that you have a track record of paying back the money.

Additionally, the bank will ask for your business plan and other details about your company. You might
need to show how the money will be coming in from customers, and potential details that you should
anticipate in the future.

Each lender will set the terms of the loan based on your risk and qualifications, which means that there
are various possibilities for interest rates, loan caps, and repayment schedules. If you are a high-risk
borrower, then it is likely that you will have a high interest rate and a lower amount for the loan. One
option is to shop around with various banks and credit unions to find the best terms that you can qualify
for.

Also, don’t feel disheartened if one lender rejects your application. If you receive a rejection, then talk to
the lender to learn why the loan wasn’t approved. This information can be valuable so you can change
your future applications to increase the likelihood that you will be approved. Some lenders will let you
reapply after the concern has been fixed. Or, you can use the feedback to improve your application with
other lenders.

Paperwork to Provide with Your Business Loan Application

What are the specific requirements that will be requested by your lender? You need to be prepared with
paperwork and other information when you are completing the loan application. These are some of the
most common requirements that lenders might request:

Purpose of the loan

Desired amount for the loan

Personal credit score

Business credit score

Business plan

Time in business
Type of entity

Industry

Business permits and licenses

Bank statements

Accounting reports

Tax returns (both personal and business returns)

Rent or lease agreements

Business ownership information

Disclosure of current debt

Proof of collateral

Legal agreements or contracts currently in place

The best thing you can do is put yourself in the lender’s shoes. What are they looking for? How can you
show that you are a reliable borrower? The more information you provide, the better you can show that
you are a great customer for their lending business.

Pros and Cons of Small Business Loans

Is a small business loan the right solution for your situation? Here are a few pros and cons to help you
decide if you should move forward with the loan:

Pro – Additional Capital: What could you do if you had access to additional capital for your business?
This financing can be essential to help you stay afloat during the lean months and build your business
when things are going well. Many business owners have trouble with cash flow, which is why a loan or
line of credit can be essential in the hard times. The money can be used for business costs as needed.

Con – Interest Accrual: Whenever you are borrowing money, it is going to cost you in the form of
interest expenses. The lender is offering the money with the purpose of making a profit on the deal.
Interest expenses aren’t always a bad thing if you can leverage the cash to help your business grow. But
if you aren’t careful with money management, then these interest costs could start eating into your
profit margins.

Pro – Cashflow Management: It is common for small businesses to have ups and downs. For example,
companies in the retail business refer to “Black Friday” as the turning point of the year when the real
profits start to flow. Then, sales often start to slow down in January. If you are worried about cash flow
management in the future, then a business loan can give you the peace of mind for those difficult
months.

Con – Money Management: Just because money is available through your small business loan, don’t let
that be a reason that you make poor money management decisions. Some business owners find that
they are more risky with their money because they have a credit line to tap into. If you put your cash
into a questionable business investment that falls through, then you might find yourself between a rock
and a hard place when you can’t get access to the cash that is needed for paying the bills.

Pro – Build Business Credit: Did you know that your business can build a credit history, just like your
personal credit score? Borrowing money through your business can help you establish a reputation that
opens up options for more loans in the future when needed. Even if you don’t need access to the cash
right now, it is smart to build your business credit so you are ready with the money when things get lean
during your slower months.

Can You Get a Loan if You Have Bad Credit?

Just because you have no credit history or a bad credit score, it doesn’t mean that you won’t be able to
qualify for a loan. But it might be necessary to offer collateral – giving the bank something to fall back on
if you miss the payments.

Collateral can be offered in the form of property. For example, if you own an office building and hold
equity because the mortgage has been paid down, then the building could be offered as collateral. You
need to know the consequence if the loan isn’t repaid. Often, the lender will place a lien on the building,
so the repayment will occur when the building is sold in the future.

Also, consider alternative lenders if you can’t get a loan through the bank. Sometimes, angel investors
are willing to put up the money for a share in the business profits. Connect into some of the business
networking groups in your area to see if you can find people who are interested in investing.

Manage Your Business Finances

Staying ahead of your financial tracking and management is key to protect your cash flow and help you
position for a small business loan if needed. When you have accurate bookkeeping and accounting
records, it shows the bank that you are responsible with your money, which increases the likelihood that
they will be willing to lend the cash to you.
Our team at Easier Accounting is here to help with your financial management. If you are interested in
learning more about the bookkeeping and accounting services that are offered, then you are invited to
contact us today: (888) 620-0770.

Government grants

Pros and Cons: Grants

You can pursue grants from foundations, corporations, or government agencies. You will need to write a
grant proposal, following the guidelines of the potential funder.

PROS

You can receive generous amounts of money.

Once you have obtained one grant, you are more likely to receive others.

Receiving grants is a good way to build your organization's visibility and credibility.

CONS

You need to do time-consuming research on the granting agency before writing the grant.

You need a person talented and experienced in writing grants who is also very familiar with your
organization.

Competition is fierce, and the success rate is low. On the average day, roughly 2,700 grant proposals are
submitted; fewer than 200 will receive funding.

There are strings attached to the money you receive. You can't do whatever you want with the funds.

Most grants are short term. When they run out, you have to start over.

TIPS TO REMEMBER

When writing your proposal, focus not on your needs but those of the potential funder.

It's crucial for you to have a well-defined mission statement and to find a funder whose mission
statement dovetails with yours.

Pay special attention to the exercises you completed in step 3, in which you determined how your
constituents defined your organization's strengths and market niche.

Assessing the funding environment through the eyes of a targeted donor is critical to proposal success.
The Checklist For Grants will help you perform such an assessment.
If the funder turns down your grant proposal, don't be discouraged. Politely ask why you were turned
down -- and what you can do to improve your chances next time.

For monthly updates on current grant opportunities, subscribe to the Society's e-newsletter - Funding
Alert.

What is a Government Grant?

Government grants are non-repayable funds awarded by the government to nonprofits, students, and
artists who are working for a good cause. Even though many nonprofits hope to get government grants,
it is easier said than done as the eligibility requirements are very strict and the competition is fierce.

Pros of Government Grants

There are several advantages of government grants if a nonprofit is able to score one.

Non-Repayable: The biggest benefit of government grants is that they are not expected to be repaid —
consider them as a donation from the government. Many government agencies are willing to award
certain organizations if they believe they are doing work worth encouraging, even if the company is just
getting off the ground.

Availability: The best part about government grants is that they are widely available for organizations in
all industry, be it healthcare, education, commerce, or any other sector. The United States Department
of Agriculture awards grants to businesses that use sustainable, clean energy systems. You can find a list
of grants available at grants.gov and SBIR.gov and other government websites.

Credibility: A nonprofit that receives a government grant is seen as credible in the eyes of others. This
means it will be able to attract more funding and donations in the future. Some agencies, government
and otherwise, may also consider your organization an expert in the field and may give you a platform.
They may introduce your company to potential partners and other resources. Your chances to get more
government funding also increase.

Limitless Grants: A nonprofit can apply to as many government grants as it wants since the government
puts no limit on this. This means if you are good enough, you may be able to win multiple grants for your
nonprofit.

Cons of Government Grants

In spite of all the advantages, getting approved for a government grant is very difficult.
Drafting Proposal: This is the most taxing task of a nonprofit’s grant application. If you do not have a
convincing proposal, your project means nothing, as government grants are subjected to extremely
strict criteria. Federal grant applications can take as much as 200 hours and several months to draft and
most nonprofits need to hire a professional proposal writer, which can cost them a further several
thousand dollars in expense. It takes even longer for your organization to find out if the proposal has
been approved or rejected.

Competition: The rate of successfully getting a proposal approved is very low as the competition is
fierce. According to the stats, only 200 grants proposals will be accepted out of a pool of 2,700
proposals.

Strings Attached: Your grant will only be approved if the government thinks your company’s mission
aligns with the government’s beliefs. A nonprofit which has won a grant needs to stick to the rules and
spend the money only on those projects that have been deemed important enough by the government,
and not on the nonprofit as a whole. To ensure compliance, the government will track the usage of its
funds.

Complex Reporting: Government grants require complex reporting and data tracking since the money
comes from taxpayers and the federal agencies need to make sure it is put to good use. This involves a
lot of paperwork and a lot of human labor.

Short Term: Government grants are unsustainable, short-term options and cannot be relied on for long
periods of time. Even though you may get a big boost of funding from a single grant, it may not be
possible to get another grant from the same agency.

A government grant can be extremely helpful, especially for nonprofits that are just starting off.
However, you need to bear in mind that this type of funding is only a “soft” option and a nonprofit will
need to rely on more sustainable sources of income if it wants to keep its doors open.

Crowdfunding

Crowdfunding has become increasingly popular ever since platforms like Kickstarter and Indiegogo
emerged on the scene a decade ago. It’s no wonder why crowdfunding platforms are exciting to many.
All of a sudden, aspiring entrepreneurs who needed cash to turn their ideas into reality could pitch their
businesses directly to the public—sidestepping the traditional gatekeepers of small business financing,
like banks and venture capitalists. Established small businesses looking to fund new product
development could do the same.

Several noteworthy and successful companies—like Oculus, Pebble, and SkyBell—started out on
crowdfunding platforms. On the flip side, untold numbers of campaigns never reach their fundraising
goals.
Is crowdfunding right for your small business? Consider these pros and cons to determine whether it
makes sense for your specific situation.

PROS: Reasons to Consider Crowdfunding

1. There’s not much financial risk

Crowdfunding enables you to test the waters to see whether your idea has merit without taking on a ton
of financial risk. You can test the market and get some reactions before spending money on expensive
inventory, materials, or development. That beats funding an unproven business idea out of your own
pocket.

2. Your campaign could go viral

You never know if your campaign will spread quickly across social media, exposing your product to a
number folks you’d be unable to otherwise reach.

3. A successful campaign validates your business idea

Reaching or exceeding your fundraising goal proves that there’s demand for your product or service.
Doubt is removed from the equation.

4. You keep all of your equity

If your campaign succeeds, you’ll have to deliver rewards to your backers—but you won’t have to give
up any equity or lose any control of your company.

5. You can tap into an existing community—and build your own

Crowdfunding allows you to leverage an engaged community that’s already looking to support ideas like
yours. Create a successful campaign and you’ll build a large community of your own. Together, they’ll
provide critical feedback you can use to make your idea stronger.

CONS: Reasons to be Cautious With Crowdfunding

1. It takes time and money

Successful crowdfunding campaigns require a lot of effort. You’ll likely also have to invest several
thousand dollars—if not tens of thousands of dollars—to build prototypes, create appealing videos,
write persuasive content, and market it all effectively.

2. Your campaign might not succeed

Less than one-third of all crowdfunding campaigns meet their goals. If yours doesn’t succeed, you may
have to deal with some bad press or embarrassment—and you won’t get the time or money you
invested back.

3. Someone could steal your idea

Unless your idea is protected—with patents, copyrights, or trademarks—there’s a chance someone

could stumble across your campaign and decide to try to mimic what you’re building. Keep your fingers
crossed that they can’t build your idea better or faster than you can. Even if you hold a patent or
trademark, if your idea is attractive, someone might try to copy you, anyway, and you could be faced
with the challenging decision of whether, or how, to fight a legal battle.

4. You have to pay several fees

Kickstarter, for example, takes 5% of every successful campaign. Those who meet their goals on the
platform will also have to pay credit card companies 3% plus $0.20 on each transaction over $10. If, for
example, you raise $100,000 on Kickstarter from 100 people who all put in $1,000, you’d end up with a
little less than $92,000 to get to work with. That may not be the worst thing in the world, but it’s
something to consider.

5. It doesn’t work for all businesses

You may be able to crowdfund enough money to build a consumer-facing product—like a card game, a
jacket, or a smartwatch. If you’re thinking about starting a catering or painting business, you’ll likely
have to look elsewhere for capital.

Crowdfunding may be the best path forward for some businesses. Unfortunately, a significant majority
of small businesses that go this route never meet their fundraising goals.
If crowdfunding isn’t right for your company, you’re not out of hope. There are other small business
financing mechanisms to choose from. Learn about them in our guide: Small Business Funding,
Demystified

Microloans

Microloans themselves have different advantages and disadvantages when compared to other financial
products:

Microloan vs. Microcredit: What’s The Difference?

Microloans vs. Personal Loans: What’s Better for Your Business?

Microloans vs Lines of Credit: What is Better When You Need Fast Financing?

In this post, we will provide some of the pros and cons of this type of business loans to help you
understand whether or not microloans are right for you and your business.

Pros of Microloans

Microloans tend to be smaller and scale which makes them beneficial to business owners for a few
reasons:

1. Flexible Requirements

Microloans are not nearly as strict in terms of requirements when compared to traditional business
loans.

Traditional business loans require you to have a very high business credit score, sufficient business
history (usually having operated for at least a year is a requirement), and assets that can easily be
liquidated if you can’t pay back the loan.

Microloans are more flexible and consider other factors. They are very personal, and microlenders will
typically forgo looking at credit history and instead will look at personal references, personal collateral
and what personal guarantees you can give.
For business owners who have not been operating for long or who have a shaky credit history,
microloans can be a great option.

2. Quick Application Process

Traditional business loans can take months to get approved. Most business owners know that time is
money, so having to wait for months to get the capital you need can really hurt your business and
financial goals.

Microloans are designed to get you your money quickly. Typically, you can get approved and funded in
one or two weeks when applying for a microloan, which can save you from having to operate
underfunded for multiple months.

3. Training

Microloans are not only supposed to fund business owners, but they are also supposed to help guide
smaller startups to become thriving businesses. This is why many microlenders offer advisors or business
training along with their microloans.

This benefits both parties, as the borrowers can gain invaluable insights into running a successful
business and the lenders can ensure the business owners they loan to will not fail and be unable to pay
back their loan.

While it may seem like an unnecessary burden, having an educational component along with the loan
will give you more knowledge that you can use in making your business even better.

Cons of Microloans

1. Small Loan Amounts

As the name implies, microloans typically do not involve large amounts of money. If you are looking to
open a new location or buy state-of-the-art equipment you may need to look beyond a microloan.
Microloans are designed to give business owners a little push in the right direction, they are not going to
bail you out of costly situations the same way a traditional business loan could.

Microloans are usually better served for smaller projects like replacing a piece of important equipment,
hiring a few more employees, or buying a little extra inventory for the coming quarter.

2. Higher and More Numerous Payments

Although microloans involve smaller amounts of money, lenders typically want to get the money back as
fast as possible. This means much shorter repayment timelines, which means you will be paying more
per payment.

Some lenders even require you to make weekly payments, which means you need to be really on top of
the repayments or you may begin to fall behind.

3. Some Microloans Have Restrictions

Some microloans have certain restrictions on what you can spend the resulting funds for. Many
microloans do not allow you to use the gained capital to pay off loans or buy real estate.

You will need to get very familiar with the lender you choose and whether or not they have any
spending restrictions.

Camino Financial Microloans

We offer our own version of microloans to business owners, take a look at some of the features and
benefits of our microloans to see why they would be right for you and your business.

Features Advantage
Loans ranging from $25,000 to $75,000 (based on the cash flow of your business) Offered
Microloan amounts cover a variety of situations, whether you just need a quick boost to get you by or
something more substantial to improve your business.

Flexible Payment Frequency (based on the credit of the borrower) Many business owners will only
pay once per month, which puts less of a burden on you. However, high-risk borrowers (those with poor
credit histories) will have to make anywhere from 2 to 4 payments per month.

Payment Period of 24-36 Months Longer payment periods mean you will pay less per payment,
which gives you time to use your funds to build your business instead of having to pay back large sums
immediately.

Funded as Quickly as 2 Days Those approved for a Camino Financial microloan can get funded in as
little as 2 days (this requires you to have business documentation available quickly, otherwise it could
take longer to get funded).

Interest Rates Ranging from 25.50% to 40.00% Interest rates vary based on years in business, collateral
available, etc. For those who have strong cash flows and significant collateral, the interest rates will be
quite low compared to traditional business loans. Those who don’t meet those requirements will have
higher interest rates, but, likely, they would not be approved by other lenders at all.

Be sure to learn more about the requirements and benefits of a Camino Financial microloan. You’d be
surprised how much of a difference a little boost in your capital will make.

A Microloan is What You Need

At Camino Financial we always strive to fulfill our motto: “No Business Left Behind”, and a big part of
that is helping you get the best financial product that will help you thrive and grow.

Apply for a microloan today and start forging the path to success.

Microcredit Definition

A microloan is a relatively small amount of money issued on credit for a relatively short time. Both
individuals and legal entities can use this service.

But most often, it is needed by people who want to start own business. Another feature of this service is
the rather quick cash withdrawal, which helps not to waste extra time but to start your business
immediately.
Another advantage of microloans is that there is a low-interest rate. But there is a chance to get
scammed by bad organizations. Therefore, be extremely careful when trying to find your tribal lenders
among the variety of proposals on the web.

It allows citizens or micro-entrepreneurs who do not have sufficient opportunities to apply for standard
consumer loans. Thus, people have the chance to improve their financial situation and solve the trouble
associated with debt.

People like microloans for the opportunity to get money right away without any paperwork. They are
ready to overpay considerable interest on the loan just to do without it.

The Advantages of a Microloan

Quick clearance. The whole procedure will take no more than an hour.

It is easy to obtain. Microcredit is available to a wide range of borrowers. All that is required to obtain a
loan is an identity document.

Microcredit can be borrowed even when you already have a loan. This possibility is ensured because the
credit history of the borrower is not checked when obtaining a microloan. To compare, when applying
for a consumer loan, bank employees carefully study the credit history of the borrower.

Short payout period. Microloans differ in small borrowed amounts, but the repayment period is usually
short. Microloans for a week and 1-2 months are especially popular.

The Disadvantages

High-interest rate. Considerable interest will have to be paid depending on the loan term. In this way,
the creditor is reinsured because there is no guarantee that the microloan will be fully paid.

Court. The bank has all the right to go to court if you are not paying the loan on time. This is fraught with
the fact that the interest will increase to the total amount of your debt. Given that 2% is usually charged
per day, the amount will be rather big.

Fraudsters offering microloans. The essence of their work is that deceivers give a loan but strictly on the
security of the borrower. Given this fact, you need to be extremely careful when choosing a place to
receive a microloan.
Invoice factoring

What is Invoice Factoring?

Unlike a business loan, invoice factoring creates an increase in cash with money that’s already owed to
your business by customers.

The basic process is simple; you sell your outstanding invoices to a factoring company that pays a lump
sum, usually between 70 and 90 percent of the invoice total. Then, you’ll this money will be sent to your
bank account and can be used immediately for working capital.

This can be particularly helpful because instead of having to wait as long as 30 to 90 days for customers
to pay your business, you could get this money in a matter of days from an invoice factoring company!

It’s important to note that the company will charge a factoring fee (or discount rate) for the service,
often a percentage of the invoice amount. Then, the task of collecting outstanding invoices will belong
to the factoring company.

Even though working with an invoice factoring company can be beneficial to small business owners,
there are also downsides that come with it. You should weigh the pros and cons prior to applying for
invoice factoring, so keep reading to see if this is the best option for your business!

What Are the Pros of Invoice Factoring?

As previously mentioned, the most notable benefit of invoice factoring is that you can receive the
money owed to your business without having to wait for customers to pay you back. Below, you’ll find
other specific benefits that come with invoice financing:

1. Immediate Cash Flow:

When applying for business loans or other financing options, it can take months to be approved. Then, it
can take additional time to actually receive the financing that you’re approved for. In comparison,
invoice factoring gives you access to cash quickly, so you can keep your business running smoothly. This
is an especially viable option if you have short term financing needs and can’t afford to wait weeks or
months to get approve, or don’t want to wait for your customers to pay you back.
2. Ongoing Cash Flow:

Invoice factoring doesn’t need to be a one-time financing option. You can build a relationship with your
factoring company that will continue if it makes sense for your business. Maintaining cash flow won’t be
a problem because you won’t have to wait for invoices to be paid before you have money in your bank
account each month.

3. Better Chance of Getting Approved:

Collateral, credit score, and loan history aren’t major factors in determining your ability to use invoice
factoring. Typically, the factoring company will be most concerned with looking at the payment history
of your customers. This gives them a good idea of what kind of risk they’re taking on. So, if your credit
score is low or you have other detrimental aspects to your financial history, invoice factoring might be a
feasible option.

4. Ability to Outsource This Task:

Let’s face it – keeping track of outstanding invoices and contacting customers is time consuming. Due to
this, giving those tasks to another company will take a major task off your plate. You’ll have more time
during the business day to deal with other responsibilities, while the factoring company sets terms and
contacts customers for payment.

5. No Collateral Required:

The invoices themselves act as collateral, so you won’t have to worry about submitting real estate,
equipment, or other costly forms of collateral.

6. Improved Customer Relationships

Some of your responsibilities as a business owner can be frustrating and difficult. Debt collection is one
of those tasks. By handing over this responsibility to a factoring company, you don’t have to look like the
bad guy when it comes to collecting money. This can help maintain strong, positive relationships with
customers. Hopefully, it will enable you to create longer-lasting client relationships, too!

What Are the Cons of Invoice Factoring?

Although it’s understandable that you want to receive the money that’s owed to your business, invoice
factoring can come with some financial and operational disadvantages.

1. The Cost:

The fees associated with this type of financing can be limiting. Typically, a factoring company will charge
between 1 and 5 percent of the total invoice amount in service fees. You’ll need to decide if the tradeoff
for immediate cash is worth the loss. If your business is on a tight budget, it might make sense to wait
for customer payments instead of receiving invoice factoring at an additional cost.

2. Liabilities:

It’s important to know that you may be responsible for unpaid invoices. Invoice factoring companies
don’t act as collections agencies, and they most likely won’t put in extra time to track down late paying
customers who don’t meet the terms of their agreement. If you have a recourse invoice factoring
agreement, you’ll be responsible for paying for those unpaid invoices, or trading in a different invoice of
the same amount to cover the cost.

3. Dependency on Customers:

When determining eligibility for invoice factoring, the company will look at your customers’ payment
history to calculate the risk of taking on your invoices. If your customers have a habit of not paying you
on time, the factoring company will assume they won’t be paid on time either and will be less likely to
take on your invoices.

4. Lack of Control:

Invoice factoring involves handing over complete control of your invoices to another company. Some
business owners don’t like this, because they don’t want another company having access to information
about their finances.

You’ll need to make sure that you’re comfortable with that company and their practices before taking
that step. If you choose a reputable company, you should be able to trust that the process will go
smoothly.
Invoice Factoring vs. Invoice Financing:

Now that you’ve learned the ins and outs of invoice factoring, it’s important that you also know about
invoice factoring, which is a similar option.

With invoice financing, also known as accounts receivable financing, your invoices are purchased by the
lender, but you must pay a percentage of the customer’s balance. Then, the invoice financing company
will work on collecting the customer’s payment. Once they receive it, the remaining amount is factored
back to your business. This amount won’t include fees that were acquired.

Both invoice factoring and invoice financing can be beneficial, but it’s important to determine which
method makes more sense for your company. If you want more control over collecting your outstanding
balances, invoice financing might be the best choice. However, if you want to avoid spending time to
contact your customers about the outstanding balances, factoring could be a better option.

Conclusion: Is Invoice Factoring Right for Your Business?

Not every financing solution works well for all small businesses. While invoice factoring might be great
for some businesses, your company should also explore business loans, cash advances, sba loans, and
lines of credit, just to name a few examples.

Invoice factoring works well for business owners that need money quickly, have reliable customers that
have a history of paying invoices on time, and can afford the fees that come with selling invoices to a
third party. If this sounds like your business, you might benefit from an invoice factoring solution!

Editor’s Note: This post was updated for accuracy and comprehensiveness in March 2019.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those
of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these
entities.

Credit card
Credit cards have become an essential life tool. They can be used to make purchases you don't have the
cash for, or to purchase something from a remote seller without having to wait for a physical check to
be delivered.

The Advantages of Credit Cards

They are very convenient to use. The majority of businesses accept credit cards, which means you don’t
have to stop by the ATM to pull out cash before going out. Keep in mind that some places may not allow
you to tip via credit card.

You have more purchasing options over the phone, internet, or in person. If you only have cash, you’re
limited to in-person purchases unless you purchase money orders. The choices you have also means that
you are able to quickly pay with your card and be on your way.

Pay Over Time

You have the ability to pay off your balance over a period of time. It's good practice to pay your credit
card balance in full each billing period to avoid fees and interest. The exception is with charge cards,
which require you to pay in full to keep your card in good standing.

Making payments over time can be beneficial if you need an item or service immediately, but do not
have the cash at that moment.

Rewards for Use

Some cards give you the ability to earn rewards that can be used for cash, gift cards, miles, or other
merchandise. The more you use your credit card, the more rewards you earn. You can redeem your
rewards as you go or save them.

Low Introductory Rates

Many credit cards come with 0% interest on purchases and balance transfers for an introductory period
of at least six months. This gives you the ability to use your card initially and pay off your balance over
time without incurring interest.

Security Features
Credit cards are more secure than traditional checking methods. If someone gains access to your
checking account, they have the ability to drain it. You then have to wait for the bank to process your
fraud report and replace the funds.

If your is credit card is stolen, you'll have to wait for the card issuer to clear up the fraud, but you'll not
be cleaned out in the process.

Disputable Billing Errors

The right to withhold payment for billing errors (as long as you dispute in writing). When there’s an error
on your statement, you have the right to dispute it with the credit card issuer. In the meantime, you
don’t have to pay for that purchase unless the credit card issuer’s investigation turns up evidence
against you.

Disadvantages of Credit Cards

With all the benefits that come along with using them, there are some drawbacks to using credit cards
that may dissuade you from using them.

Credit cards extend your purchasing power by giving you a credit limit. This limit gives you the illusion
that you have more money than you really do because you can spend money you do not yet have, and
may not get.

This illusion is what gets many people into unmanageable credit card debt. If your monthly income is
$4,500, and your monthly expenditures are $3,000 you have $1000 of income to set aside. A card limit
of $6,000 gives you the ability to use $6,000 you would otherwise not save up for at least six months.

The danger here is the interest and not being able to make payments that will reduce the balance.

Your Future Income is Reduced

Your income in the future is reduced each time you use a credit card–or any other form of debt–because
you’re borrowing money that you don't have. A portion of your future income has to go toward repaying
your credit card balance if you want to protect your credit.
The more debt you are in, the harder it becomes to pay off, or even pay down your debt. Continuously
using your card while making minimum payments increases your debt and decreases your future
income.

Credit Card Interest, Fees, and Identity

Depending on your credit card rate and how you use it, credit cards can cost you hundreds of dollars
over the course of a year. Understanding how compounding interest works and knowing your billing
period can help you coordinate payments, and avoid fees or increasing balances.

You'll be charged fees for making a late payment. Fees add up quickly, and they are added to your
balance. This means your fees are then charged interest as well.

Having a credit card puts you at risk of credit card fraud. Thieves don’t have to steal your card to get
your information. They can hack into a company's information network and steal personal information
from thousands of customers, then use it to make fraudulent purchases. (You’re typically not liable as
long as you report the charges right away.)

Debt and Life Affects

You create more debt each time you use your credit card. You can keep the debt from growing by paying
off your balance each month—but if you only make minimum payments and keep making purchases,
your debt will quickly grow.

Your credit score is tied directly to how you use your credit card. If you run up large card balances and
pay your credit card late, your credit score will begin to drop. Low credit scores affect more than just
your ability to purchase products and services—a low score can affect your professional life as well.

Low credit scores reduce your ability to use credit in circumstances when you need it the most. It also
demonstrates to businesses and employers that you are may not be financially responsible.

Credit card debt is a vicious cycle to get into and tough to get out of. It can all be avoided by not
charging more than you can afford to pay off, and by make payments on time.
If used correctly–making your payments on time and keeping your balance low–credit cards help you
build a good credit score that you can use to qualify for loans that you might need.

Credit cards are very handy in emergencies. While not the best option, a credit card can help you cover
an unexpected expense if you can’t afford to pay it from savings. Significant vehicle repairs, home
repairs, and replacing broken appliances are expenses that are generally required—credit cards can help
when chosen wisely and used properly.

The Pros And Cons Of Credit Cards

Pro: They’re a Great Way to Build Credit

Your credit history is your track record of borrowing money and paying it back. Each time you open a
new credit card account, the lender reports that activity to a credit reporting agency. They’ll also report
if you miss a payment or are frequently late paying your monthly installments. Your credit history
determines your credit score, which ultimately lets lenders know whether you’re a good candidate for a
credit card or loan and which parameters to assign you (i.e., your interest rate and credit limit). Good
credit can improve the quality of your life and get you closer to your financial goals if used responsibly.

Con: High Cost of Borrowing

Although credit cards are convenient, the cost of borrowing is typically much higher than with a
traditional loan. Many come with high APRs (the annual interest rate charged on borrowed funds),
service fees, and penalties for late payments. If you don’t pay your balance off every month, these
additional finance charges can quickly grow your existing debt. Additionally, many credit cards allow you
to get a cash advance if you need cash quickly—but the interest rate charged on these advances is
typically even higher than for purchases.

Pro: They’re More Secure Than Cash

Credit cards are used frequently—even by people who have access to cash—because they offer another
level of security. If you lose a credit card or someone steals your information, the credit card company
can place a hold on it to avoid fraudulent purchases. Additionally, many credit card companies monitor
suspicious activity and will notify you if something seems inconsistent with your typical spending
behavior.
Con: It’s Easy to Dig Yourself into a Hole

Depending on your credit limit, a new credit card may suddenly give you access to more funds than
you’ve had in the past, making it easy to overspend if you are not disciplined. To avoid digging yourself
into a hole and potentially damaging your credit and financial health, it’s important to only spend what
you can reasonably afford to pay back each month. If you don’t already have a budget, making one can
help you stay on track, so you don’t accumulate too much debt.

Pro: Rewards Points

Many credit card companies offer rewards such as cash back or airline miles for using them regularly. If
you use a credit card for routine expenses, these rewards can add up quickly. Though many rewards
cards come with annual fees, the benefits you can accrue over the course of a year can more than offset
the cost of keeping the card open.

Con: Applying for Too Many Credit Cards Can Damage Your Credit

Several factors impact your credit score, including payment history, current amount owed, length of
history, new credit, and types of credit used. While having a few cards that you use regularly and pay
back on time can help you build and improve your credit, there’s a limit to how many cards you should
reasonably open. Each time you apply for a new credit card account, lenders can check your credit
report to assess your credit worthiness. Not only can too many card applications negatively impact your
credit score, lenders may get suspicious if it looks like you need access to a lot of credit and reject your
application.

Realistically, nearly everyone needs to borrow money at some point to achieve their financial goals.
Credit cards are a great way to bridge the gap between paychecks or finance large purchases that you
can pay off over time. However, when used irresponsibly, credit cards can quickly erode your credit and
financial health. Therefore, it’s important to consider all the advantages and disadvantages before
incorporating credit cards into your financial plan.