It has been said that capital is the lifeblood of every business. Effective capital management requires forecasting capital resources, diversifying your capital, and wise capital deployment management. 

What is Business Capital 

Business capital is the money and assets that companies use to fund their operations and generate revenue. Capital enables a business to produce products and services and pay for its payroll expenses. The types of financial capital that a company can use include investments, equity, debt, and working capital. Working capital is the liquid assets used by a company to operate and pay its short-term obligations. 

Why Do Businesses Need Capital 

Businesses need funds for: 

Working capital. Working capital refers to the finances used to cover everyday expenses including payroll, rent, and normal operating expenses. 

Inventory and operating stock. 

Funds for expansion including funds for such purposes as hiring new employees, opening a new office, entering a new market, acquiring another company, introducing a new product or service, and purchasing new equipment to enhance production capacity. 

Renovation expenses. 

Enhancing cash flow. That can be needed especially due to sudden increases in competition, seasonal business declines, or unexpected expenses. 

Debt consolidation, which can help to lower interest rates, reduce monthly payments, and enhance the possibility of securing additional capital. 

In all these cases, diversifying your capital can be a smart move. 

Why Diversifying Your Capital is Smart 

Diversifying your capital is smart because it can result in lowering financial risk by spreading financing across multiple sources instead of relying on a single source. This reduces the risk that a single source of credit or financing might fail or become unavailable. Diversifying your capital can help you get access to better financing rates and terms. It can help you achieve increased financial flexibility in terms of repayment terms and payment schedules. It can make your financing arrangements more suited for different business needs. And it can help your business build a stronger and more diverse credit history. 

Common Sources of Capital 

Common sources of capital fall into two categories: debt financing and equity financing. Debt financing includes financing secured from commercial banks and credit unions, commercial finance companies, leasing companies, state and local government lending programs, trade credit arrangements, and a variety of alternative lending sources.  

A Guide to Alternative Financing Sources 

Utilizing alternative financing sources can be a great means of diversifying your capital. It has become a popular option for many businesses who seek financing and need to secure capital. Alternative financing refers to lending that takes place outside of conventional financial institutions. Alternative financing is generally more flexible than conventional lending and usually has faster turnaround times. Loan application processes are also simpler. Alternative lenders are more likely to offer loans in smaller amounts. They also offer some unconventional lending options. 

Alternative lenders include direct private lenders, marketplace lenders, and crowdfunding platforms. The most common types of alternative loans include lines of credit, short-term loans, installment loans, merchant cash advances, microloans, invoice factoring, bridge loans, equipment financing, and peer-to-peer lending. Alternative financing provides a wide range of options to meet the unique needs of companies. 

To secure satisfactory alternative financing, be sure to develop a robust business plan and research alternative financing sources extensively. Showcase your business track record showing your business model, growth strategy, and potential returns in a way that will attract investors or a financing entity. Network extensively and effectively to build strong relationships that may lead to partnerships, referrals, and potential investors.

Get Expert Alternative Financing 

Contact Multiple Financial Solutions, with offices in Jacksonville, FL, and Houston, TX. We offer a portfolio of alternative funding solutions for companies including business lines of credit, merchant cash advances, and commercial real estate funding. We focus on businesses that have been active for 2+ years and are looking to grow to the next level. If you are facing a funding deficit, we are ready to help you.