Access to Capital: Latoria Williams on How Businesses Attract Financing in 2023

Each business starts with an idea, but you still need money to make your vision a reality. We spoke to Latoria Williams, CEO of 1F Cash Advance, and asked her advice on securing funding for starting a new business.

Please, name some common challenges that new businesses face when they try to access new sources of investment and financing for their further development and expansion.

Latoria Williams: First of all, I’d say it’s a lack of knowledge of where they can seek help from. Traditional methods of financing are typically the first that comes to mind. Thus, business owners turn to banks, hoping they will receive support. This entails a few more problems. Businesses often can’t meet the lenders’ strict eligibility requirements. For example, they may not own any valuable property to pledge, have a limited credit history, or lack track records. This is especially true for early-stage businesses and startups. You can also add the likely risks that investors may not want to take on and the lack of brand identity. All these factors may hinder business owners when it comes to additional financing.

You mentioned strict traditional lenders’ requirements. Can you expand on the topic? How do traditional bank loans, with their stringent eligibility criteria, affect businesses seeking capital?

LW: Even if an entrepreneur can qualify for a traditional bank loan, they are likely to undergo a rather lengthy and complex process full of hassle and paperwork. Although there are various modern fin-tech solutions in the lending industry, conventional lenders are still quite conservative. This is how they try to offset risks and get a guarantee that their money will be returned. But for businesses seeking capital, this combination of reasons makes them increasingly look for alternative sources of funding. Thus, the most common implication lies in shifting towards available alternatives, such as venture capital companies, angel investors, crowdfunding, or peer-to-peer lending platforms.

Let’s talk about venture capital firms and angel investors. What role do they play in supporting business growth? What unique advantages do they offer?

LW: Venture capital firms and angel investors provide financial assistance in exchange for equity or ownership stakes. This means that they are interested in your business to succeed and grow. They act like mentors and advisors, guiding you through the process and helping you cope with challenges. But keep in mind that this can be a kind of disadvantage too. Besides risk-sharing, it’s also control-sharing. This way, you won’t be the only one who is responsible for making important business decisions.

I get it. There are pitfalls, anyway. And what about crowdfunding platforms? What role do they play in fundraising for small businesses? What are their benefits and considerations?

LW: Thanks to crowdfunding platforms, business owners can access a wider network of individual investors. Gone are the days when business owners had to turn to specific companies or lenders and convince them of their creditworthiness or the value of their idea. Crowdfunding platforms allow you to get donations from everyone who believes in your business and is interested in its success. Additionally, they can help you build your brand along with the community of supporters, provided that your campaign attracts interest. This can also help you get more attention from investors by demonstrating market demand.

When it comes to considerations, I’d say there are two main points. First, you will have to spend a lot of time and effort on campaign preparation and proper planning. Second, it’s important to be transparent and open to investors so that they understand where their investments are going.

You’ve also mentioned peer-to-peer lending as an alternative financing option. Could you please tell us more about how it works and what benefits it provides?

LW: Peer-to-peer platforms are lender- or investor-finding tools. What makes them different from traditional lending or investing options is that they link you with other individuals, not companies or financial institutions. Most P2P platforms come with a streamlined application process, fast access to funds, and exceptional flexibility. As there are multiple offers to choose from, you can find the one that suits your current needs and matches your cash flow capabilities. However, some options may come with high interest rates. Additionally, you may have to pay a certain platform fee.

And are there any government initiatives or grants available to support businesses seeking additional financing?

LW: Such programs are usually based on the exceptional value that your business must bring to society. For example, the Research and Development tax credits are available only to companies fostering innovation and technological advancements. Government grants are also aimed at supporting specific industries, technologies, or research initiatives.

However, there are a couple of options that owners of small businesses may consider. For example, entrepreneurs can turn to loans backed by the Small Business Administration. They typically come with favorable terms and unique benefits, such as lower down payments or flexible overhead requirements. Available options include 7(a) loans, 504 loans, and microloans.

What do you think is the importance of access to capital in boosting a business?

LW: I think it’s almost everything. I’d say it’s 80% of success. Suppose that you have an incredible idea that can potentially change the world for the better. How are you going to bring it to life without financing? We live in a capitalist world. Having an idea and making a physical effort is often not enough. Any expansion, growth, and development require investments. However, I believe that opportunity is everywhere, we just need to develop the vision to see it. Accessing capital is possible even if you can’t turn to traditional financing options.

Maybe you can name a few examples of companies that have successfully expanded after utilizing various funding and financing options.

LW: SpaceX and Oculus VR are the first that came to my mind. SpaceX raised capital through multiple sources, including private funding, government contracts, grants, venture capital firms, and strategic partners. Oculus VR initially gained capital through a successful Kickstarter crowdfunding campaign and then attracted significant venture capital funding.

What can you advise business owners seeking additional financing to grow their business?

LW: First of all, you need to have a well-structured and realistic business plan. This plan should reflect your idea and demonstrate its usefulness and potential. Your business plan is what people will invest their money in. Try to place it in a good light. Also, before settling on one, explore different funding options. And don’t be afraid to ask for advice from professionals in your industry. Build a strong network and cultivate relationships with them. They are not your competitors but your allies and source of knowledge.

Also, if you plan to turn to investors, you should be prepared for the fact that they will seek information about your business and its progress. So start now with building a strong presence. Feel free to demonstrate your successes and let people know how far you have already come. And be prepared to go through a due diligence process.

Final question! Looking ahead, what’s your vision of funding options for businesses in the future? How do you think they will evolve?

LW: I think we’ll continue to witness the rise of alternative platforms and sources of funding. Perhaps, they will increasingly move toward online operations, adjusting to changing business and investor expectations. Also, I think lenders and investors will be even more focused on ESG (Environmental, social, and corporate governance* editor’s note) criteria in order to reward companies that are committed to sustainability and renewable energy, as well as social causes and ethical practices.

I also think that the role of blockchain technology will increase. This can significantly change traditional methods and funding models that are available to us now. And I hope that governmental support for business will continue to grow.

Thank you very much for sharing your vision and knowledge with us.

LW: It’s my pleasure. Thank you for having me. I hope this interview will help early-stage businesses and startups navigate financing options they can access.

Latoria Williams is CEO of 1F Cash Advance, the financial company with over 40 stores across the US. Her Master’s Degree in Finance and extensive expertise in business development helped her increase the company’s revenue by over 250% in a 3-year timespan. Now she is helping early-stage businesses and startups achieve their bold financial goals.