Young Companies and Working Capital

An often overlooked issue confronting young companies is that of having sufficient working capital.  The entrepreneurs who start up these companies pour their hearts, souls, and often, life savings into getting the enterprise off the ground.  They are successful at finding just the right product or service to fit a need and the business begins to take off.  Growth, however, is not always self-sustaining.  Many times orders will overrun the capital needed to fulfill them.  In these scenarios, the entrepreneur has to make some serious financial decisions that will affect the long term success of the company and the value that the owner will realize from his efforts.

One solution is for the owner to approach other investors.  With this option, investors would be given a portion of the company for the capital that they contribute.  The entrepreneur has to weigh the advantages of giving up a piece of the business that he/she has worked so hard to develop.  Additionally, the process of “selling” that percentage to investors takes a significant amount of time and an even greater amount of energy.  This process alone could impact the ultimate success of the company.  Often, there are negotiations that drag on while bills need to be paid and orders need to be filled.

A second solution for the owner would be to seek out traditional bank financing.  While this option may not include giving up a portion of the company to obtain the needed capital, it, too, is time consuming.  Banks usually require a multitude of financial documents, verification of assets and revenue, and, most difficult to these young companies, a long period of operating history.  They then take all of that information and send it off to a “committee” to make the decision.  That committee may only meet once a month, which is not in the company’s best interests.  The variety of hoops that traditional banks require the owner to leap through can take months to accomplish with no guarantee that financing waits at the end of the process.

SouthStar Capital provides a much better solution for these hard working entrepreneurs.  We understand the need for working capital and how critical the time element can be.  We don’t require that you have been in business for some arbitrary period of time, we don’t ask for financial documents that take months to secure, and we don’t pass off the decision to some faceless committee.  Our evaluation process can take as little as a few days.  We focus on the elements of your business that are producing the revenue and look to fund that stream.  As business owners ourselves, we recognize that making sure orders and accounts receivables are able to be filled is critical.  Buying parts, equipment, or paying your employees to complete those orders is time sensitive.   We want to be a partner in your success without asking you to give up a portion of your business.

If you are a young, early stage growth company in need of working capital, give us a call to see how we may be a better solution.