We had a conversation with one of our Real Estate Broker Extraordinaire friends about all things business-related and, more specifically, about PIZZA. She loves pizza similar to one of us here at Aurora Consulting (we’ll let you guess which one).
The chat happened while discussing an innovative pizza-restaurateur who created a wonderful and completely yummy pizza product. This brilliant entrepreneur has come to realize his business is growing so rapidly that he suddenly finds himself in need of working capital to fund an expansion simply to keep up with the growth.
Good problem to have…except for the seeking working capital part.
The money part is where it gets challenging for this smart young pizza-entrepreneur. He faces an important choice while facing the money challenge.
Should he search for a Lender to provide credit financing, or, surrender part of his business to an equity investor?
At Aurora Consulting, we believe this question has a simple answer.
Why surrender equity, and cede control, when you might very well find a credit solution to obtain the much needed working capital? Yes, the answer is a question! Or, the answer to the pizza-entrepreneur’s question can better be stated with the retort, “Don’t tell me how to make my pizza!”
Bringing in an equity investor for any growing business could (someday sooner or later) lead to your equity investor asserting control with how the business should be run. That opinion could include, for this innovative pizza entrepreneur, suggestions on how to adjust the unique pizza recipe, you know, to make the product more cost-efficient.
Or the opinion from the new “partner” could be any number of other ideas, suggestions, opinions, plans, assertions, on growing the business, you know, to be more profitable.
That equity investor may have no idea at all about how to make pizza.
Many business owners are concerned with the idea of credit financing. Let’s face it, credit financing can scare the heck out of many people. Thank you to the global credit bust and subsequent recession for that anxiety-filled-ideation. Borrowing money from a Lender, whether a traditional bank, or a non-traditional portfolio lender, is often a much more tranquil experience than you might think.
The question becomes one of finding the right lender. The question never, ever, ever, becomes one of, “Hey, how about we use this ingredient in the pizza recipe instead of your original because this ingredient is cheaper and our product will be more profitable?”
Yeah, that question. It’s not going to happen when you finance your capital cash needs with the right loan product and the right lender.
Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.