bitcoin business

Should I Accept Bitcoin in My Business? (Part 2)

Cryptocurrency & Blockchain: Hype or the New Reality? (Part 2)

bitcoin business

Bitcoin and other cryptocurrencies are based on the underlying blockchain technology that comes with safety, anonymity, and a lot of confusion. Read Part 1 of this story to learn what blockchain is all about.

Digital currency prices are even more temperamental than the stock market. They can increase or decrease unpredictably over a short period of time due to their young economy, novel nature and often-illiquid markets.

But if you invest or accept crypto at the right time, you can see huge gains.

Like any other investment, you should do your homework before purchasing any cryptocurrency. The same goes for accepting Bitcoin or other crypto for goods and services.

If you don’t know much about this new currency model, then educate yourself until you are certain that it’s a valuable trade for your business. And make sure your business can stay afloat even if you lost all of that cryptocurrency. 

Be warned that many “experts” who provide crypto advice are more concerned with enriching themselves than helping beginners, so it’s best to stick to unbiased data until you really know what you are doing. To start, CoinMarketCap.com is a great unbiased source for nearly any token’s price, historical value and planned circulation. You can learn a lot by following these trends online.

Should I buy or receive crypto?

bitcoin business checklist

Before jumping into cryptocurrency, keep a few points in mind:

  1. Never keep your business savings in cryptocurrency. View it like you would a high-risk asset.
  2. If you receive payments, you’ll probably want to quickly convert them to your local currency to avoid any unpredictability with the market.
  3. If you keep your currency in crypto, know that there are risks — don’t keep anything in these digital wallets that you aren’t willing to lose.
  4. Transactions cannot be reversed. According to Bitcoin.org, transactions can only be refunded by the person receiving the funds. “This means you should take care to do business with people and organizations you know and trust, or who have an established reputation.”
  5. Cryptocurrency is still not an officially recognized currency. “Most jurisdictions still require you to pay income, sales, payroll, and capital gains taxes on anything that has value, including bitcoins.”

How do I open a digital wallet?

bitcoin business digital wallet

If you’re still interested in owning cryptocurrency or accepting it in your business, you first need a “wallet” — which is your account.

Crypto wallets consist of two random strings of characters. The first identifies your account on the public blockchain, making it a username of sorts. The second is your “private key” — a password that must be inputted before any transaction to ensure that you are the only one who can use your account. Experts generally advise keeping your private key a secret to limit unauthorized use of your account.

Once you have a wallet, you need to choose an “exchange” to facilitate your crypto purchase.

An exchange is like your cryptocurrency trading site — a place where you can buy, sell and trade digital currencies. Many exchanges are online sites, but some can also be brick-and-mortar locations.

CoinBase is a popular online choice for beginners due to its intuitive interface and the ability to fund your purchases with a credit card or bank account. Its selection is limited, so many crypto enthusiasts ultimately graduate to another platform such as Bittrex or Kraken.

The future of blockchain

bitcoin business future

Digital currencies are a complicated subject that can fill many textbooks, blogs, forums and conference agendas for years to come, so don’t rush into any decision just to jump on a bandwagon. You may miss a bit of the ride, but at least you’ll know what route you’ll be taking.

Only time will tell if crypto will change the financial landscape as we know it…

Missed part one of the story? Read it here.

Cryptocurrency blockchain

Cryptocurrency & Blockchain: Hype or the New Reality? (Part 1)

Cryptocurrency blockchain

Cryptocurrencies such as Bitcoin and Ethereum have been on a wild ride in the past couple years, famously reaching sky-high growth and then plummeting without much warning. No doubt, there are skeptics of this novel currency — but there are also countless stories of rich crypto lovers and modern businesses that have taken a chance on the digital trend. Is this just a fad, or should all companies start adopting a crypto strategy?

A confusing currency for business

Cryptocurrency blockchain confusion

It’s a non-stop rollercoaster in the digital currency world, and the only sure thing seems to be how confused it’s made the would-be investors and businesses that are considering getting on board.

It’s understandable. Many people don’t understand how any commodity can vary so dramatically in price, especially something with no intrinsic value.

Yet experts predict that cryptocurrency is here to stay for the long haul. If that is the case, most business professionals will need to learn the basics of digital currency and this emerging technology.

The sooner, the better — and potentially, the more profitable.

What is blockchain?

Cryptocurrency blockchain safety

Any discussion about crypto has to start with its underlying technology: blockchain.

Simply put, a blockchain is a public ledger that automatically records every transaction that happens on the network.

For instance, if you collect 10 Bitcoin from a customer, then a “block” on the Bitcoin blockchain will record that transaction.

If you’re thinking that it sounds easy to tamper with, think again.

Is blockchain safe?

Cryptocurrency blockchain mining

The blockchain has checks and balances for added protection. To start, every transaction on the blockchain is verified by “miners” who are individuals using powerful computers to crunch the numbers. These miners make sure that every single block is compatible with all the others that came before it. Any effort to tamper with the blockchain would need to edit multiple blocks simultaneously to ensure constant agreement — a task that’s almost impossible to do.

In addition, whoever owns the computers that successfully verify a transaction will be rewarded with brand new cryptocurrency (Bitcoin, in the example above). This provides an impressive incentive structure to keep the miners ahead of the hackers.

Blockchains also have an added security. Every single token is traceable through every account it has ever been in.

How are various crypto tokens different?

Cryptocurrency blockchain tokens

Each individual crypto token has its own blockchain, some of which operate differently.

For example, Ethereum’s blockchain is programmable, allowing for the development of “smart contracts” that automatically fulfill themselves once set conditions are met. Bitcoin’s blockchain lacks this functionality.

Likewise, various blockchains have different processing speeds, with Ethereum generally moving more quickly than Bitcoin. Of course, actual processing speeds are always variable depending on the number and quality of miners verifying the transactions at any given moment.

Supply and demand

Cryptocurrency blockchain supply and demand

There are many different types of cryptocurrency coins, and each has a differently planned circulation — or how much of it is available to the marketplace. Coins with lower planned circulations, such as Bitcoin’s 21,000,000 BTC, tend to be favored by investors since the limited supply translates into a higher price if demand is also high.

By contrast, Ripple’s planned circulation of 100,000,000,000 XRP means that any single XRP can’t be worth that much — no matter how high demand climbs.

However, a very large supply is a prerequisite for any coin hoping to compete with traditional currencies for everyday transactions, such as the U.S. Dollar. The most ardent blockchain supporters tend to favor large circulating supplies as a result.

So should you accept Bitcoin or other cryptocurrencies in your business? And if so, how do you get started. Read Part 2 to learn the answers.

factoring vs bank loans

Need a Bank Loan? 16 Ways Factoring is Better

factoring vs bank loans

If you own or operate a company, you probably know the challenges of finding business funding. Relationships with banks are important, but sometimes bank loans don’t work out. That’s where alternative financing options like factoring, also known as accounts receivable financing, come in handy.

Factoring allows you to access cash against your existing and ongoing customer invoices. You’ll work with a factoring partner who will provide you working capital and take over the collections of those accounts receivable in return for a professional services fee.

When a company needs cash flow, factoring can be the quick and reliable solution to keep your business heading in the right direction. Here are the additional bonuses to using factoring that you may have never considered:

1. Get faster funding

If you need to urgently buy supplies, order product, make payroll or repair key equipment, factoring can be easier and quicker to secure than traditional loans – sometimes as quickly as 24 hours after submitting your invoices. Unlike a traditional loan, you don’t need to submit tax returns, detailed financial statements, business plans or your financial projections – saving you a lot of time and hassle. Banks can also take longer to approve your requests, potentially making you wait for fiscal year end or the results of an audit. Instead, your factoring partner will perform an initial underwriting process to approve your application – then you’re all set.

2. Flexibility – Borrow more when needed

The amount your company can borrow will actually grow the more you sell. As your business grows, you’ll need even more cash flow to pay for supplies as you wait for customers to pay their invoices. So factoring gives you the immediate ability to borrow more, and keep the growth going. Compared to traditional banks, you will never outgrow your line of credit, as a big enough factoring company can accommodate all your growth needs.

3. No other assets required

Factoring only requires that you have customer accounts receivable to secure your funding. You don’t need other assets like real estate, equipment or inventory to apply. That means your personal home or property doesn’t have to be offered up as collateral, which may sometimes be the case with traditional bank loans. (If you do have those other assets, you can also qualify for additional funding options like Asset-Based Loans).

4. Cash flow boost when you need it – now or ongoing

Whether you need a longer-term solution or a temporary boost in cash flow, factoring can help you out of a tricky working capital dilemma. Every business will eventually run into the need for more cash on hand – so with factoring, as soon as new orders are invoiced you can have cash released into your business account. This gives you the chance to take advantage of growth opportunities that require more consistent cash flow.

5. Get larger funding than banks

Unlimited funding sounds amazing. With factoring, lending power is dependent upon the size of your accounts receivable – so an abundance of working capital is possible. Banks qualify you based on your business credit strength, whereas your factoring partner looks to your accounts receivable and your customer credit strength. If you’re selling goods or services to financially strong customers and have ongoing invoices, you can get substantially more financing than you’d qualify for with a traditional bank lender.

6. Grow your business the way you want

Instant cash means you can accelerate your growth strategy. Some companies need to hire more sales people to secure new accounts. Others will need additional equipment to manufacture their product. Still others may need working capital for marketing and advertising, office upgrades or new project development. Whatever the need, you’ll have the working capital to execute and grow the business.

Related: How high-growth companies can get unlimited cash flow

7. Take advantage of supplier discounts

Volume discounts, early payment discounts or special supplier offers are attractive options – but only if you have the capital available at that moment in time. Traditional bank loans are often not fast enough to allow you to take advantage of these discounts. But now, you can factor invoices quickly and free up cash flow to jump at the opportunities when they present themselves.

8. Shorten your cash cycle

Waiting for customers to make payment is a burden. With factoring, you can significantly shorten your cash cycle. Instead of waiting 30, 60, 90 or more days for traditional payment terms, you can receive that payment from your factoring partner in as little as 24 hours. By the time your original terms would have come due, you could have now been able to purchase more goods, make more sales and earn higher profits.

9. Free up your time

Searching for funding and traditional bank loans is a time-consuming process. Meetings, business plans and applications take up a lot of your valuable schedule that could be spent on other areas of the business. With factoring, you’ll have to complete the application process, but once approved you can regularly factor your credit eligible invoices and save time while improving cash flow.

10. Lower your overhead costs

Since your factoring partner takes over the management of your invoices, including handling customer payment and collections, your costs in these departments will likely lower. This can help offset any fees and makes factoring an even more attractive solution. You won’t get that service at a traditional bank.

11. Focus on new revenue

You and your team likely already spend a lot of time processing customer invoices and collecting payment – maybe too much time. With those duties removed from your to-do list, you can now work on other tasks that will improve your revenue like sales, marketing and building new client relationships.

12. Faster collections

Prompt and professional collections can be a big bonus when you work with the right factoring partner. With a reputable company handling customer collections, the result can be more timely payments (customers don’t want to risk a poor credit report). Once the customer makes their final payments, you’ll also receive your reserve funds from the factoring partner – so on-time collections are important to everyone.

13. Improved credit checks

Your factoring partner will also be responsible for credit-checking your customers. That gives you the advantage of having valuable intelligence about the credit worthiness of your clients, including new customers you may close. That can help improve the quality of accounts you take on, improve your credit decisions and advance your business’ debt security.

14. Less costs than equity investments – and you keep control

Equity investments and venture capital can be alternatives to traditional bank loans, but they can also demand much higher returns than the costs associated with factoring. In addition, you may be required to give up shares in your company, and that dilutes your ownership stake. It may even shift control of your business to the investors. But with factoring, there is no requirement to give up a stake in your business.

15. Protect against bad debt

In certain circumstances, some factoring companies offer non-recourse factoring, which means the factoring partner will take on the risk if any invoices are left unpaid. This type of factoring offers you additional protection against bad debt – a level of protection can be very important to some companies.

16. Improve your balance sheet

Factoring is not the same as receiving a loan. On your books, a loan would get recorded as a “debit,” which is considered a liability. Instead, with factoring there is no debt incurred. Your factoring partner is purchasing your accounts receivable with cash, and that reduces your balance sheet debt. The result will be a lower debt to equity ration, and that can actually improve your financial position on the books.

Ready for help? Turn your open invoices into working capital with Liquid Capital’s Accounts Receivable Factoring Solution.

Diagram

Recent Fundings – September 2018