Top 6 Financial Mistakes to Avoid for Early-, Mid- and Late-Stage Startups

You're a startup founder. Your to-do list is never ending: hiring, culture, sales, marketing, product development, fundraising -- it goes on and on. With everything on your mind, founders often don't spend enough time thinking about their finances. Those startup leaders who understand (and avoid) specific financial pitfalls across the three stages of their company’s life--early, mid and late--are positioned to win. So, take note. Here are the big financial mistakes to avoid across the three stages of your startup, according to Tiffany Meyers at Built In Chicago, and Michael Burdick, CEO of Paro, a company providing an exclusive network of on-demand financial professionals.

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How Got Startup Funding in 15 Days

Last October, came to Lighter Capital looking for an injection of capital to scale their business. The Chicago-based company creates tools that simplify stakeholder relations, communication, and ongoing performance tracking for more than 1,600 businesses.

Just 15 days after CEO Mike Preuss’s first phone call with the Lighter team, the company received a tranche of funding directly wired to their bank account. For those used to the typical six-to-nine-month process to secure venture capital funding, the speed of this transaction may seem hard to believe.

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Funding for Entrepreneurs from Underrepresented Communities

A recent webinar co-hosted by Lighter Capital and Founders First Capital Partners offered insight into how revenue-based financing (RBF) can be a good source of growth funding for entrepreneurs from underrepresented communities.

Kim Folsom, CEO and founder of LIFT Development Enterprises and Founders First Capital Partners, and BJ Lackland, CEO of Lighter Capital, discussed what makes RBF unique and attractive, and shed light on whey it can be an effective option for women and minorities. Then RBF-funded entrepreneurs Linda Amaro, CEO of Klarinet Solutions, and Adam Riggs Zeigen, co-founder, and CEO of Rock My Run talked about how this type of funding has been helpful to their growing businesses.

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Exploring venture debt: benefits, risks, and tradeoffs

Everybody knows what venture capital is, but many entrepreneurs are fuzzier about its loan-based cousin, venture debt. Venture debt has exploded in popularity in the last few years. Tomasz Tunguz notes that it’s 16x as popular as it was only six years ago. For some startups, venture debt can be a solid option to boost their cash flow and supplement their VC round with very little dilution to their remaining equity. But like anything, there are trade-offs and you need to educate yourself on the basics.

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5 reasons to choose debt over equity financing

When CEOs of early-stage companies think about growth capital, they rarely think of debt financing. Venture capital has a larger mindshare, and a lot of founders are anxious about taking money that has an interest rate or repayment cap attached.

They shouldn’t be. Financing your healthy growing company with debt isn’t the same thing as maxing out your credit cards to fund your product development. You have paying customers, maybe even a few enterprises. You have revenue. You (hopefully) have an accounting function. This infrastructure makes debt easy to account for: you know your repayment obligations ahead of time and you can plan for them.

In addition, debt financing may offer its own hidden benefits. Here are five reasons not to be skittish about financing your company with debt.

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Everything you need to know about the SBA’s 7(a) loan

For more than sixty years, the Small Business Administration has helped American businesses grow. The SBA was slow to adopt programs and policies that could help tech entrepreneurs, but now they fund far more than just mainstreet mom-and-pops—there are several financing options that a yount tech company might find useful.

The most common of these is the standard 7(a) SBA loan. Let’s review how it works and break down the details.

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A sustainable way forward for online lending

In mid-April, the Federal Reserve Bank of New York released findings from its 2016 small business credit survey, which asked more than 10,000 small business across the country their opinions on lending institutions. One of the big takeaways? Small businesses really don’t like online lenders.

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Funding checklist: Required documents for securing a traditional SMB bank loan

During my commercial banking days, I would often see entrepreneurs being rejected for a loan because they were unprepared for the underwriting process. Whether you wanted to secure a $100K line of credit or a $2M term loan, if you want it from a traditional bank, you'll have to provide an extensive list of documents in order to go through their underwriting process. It's tedious and time-consuming, but it’s worth it if you can qualify for one. Traditional commercial and SMB loans are definitely the cheapest capital in the market—APRs run between 4% and 8%, typically.

To help you be more successful in securing a loan, We’ve outlined the most common documents banks require. Treat this as your checklist and start preparing for them if you are thinking about getting a SMB loan from the bank.

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Four alternative loan categories for SMBs

For many small and midsize businesses, obtaining traditional bank financing is more difficult than you might think. Old-school banking's inefficiencies and outdated underwriting processes make it almost as costly for banks to make loans under $250k as it is to make loans of $1 million, and banks are facing increasingly strict capital ratios. The result is that many banks aren’t interested in making smaller loans to SMBs because the economics don’t work.

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Five debt funding options for your SaaS company

For founders, SaaS means opportunity. The SaaS market is exploding. Analysts project that the global SaaS enterprise application market will grow from a $22.6 billion market in 2013 to $50.8 billion in 2018.

For investors, SaaS means security. One of the most appealing features of SaaS startups is their sticky revenue streams, which make them less risky investments. SaaS companies often start generating revenue and profitability much earlier compared to startups in other tech categories. And thanks to their software focus, many are able to bootstrap for a long time to gain early traction.

However, bootstrapping will only get you so far. At some point, putting off fundraising means limiting your growth. So how can SaaS businesses take their companies to the next level? What funding options are out there?Read more