How To Raise Money For Starting a Business

How To Raise Money For Starting a Business - The challenge of generating money for a business is less demanding than most people tend to assume. This is especially true when you have a concept that can enrich you and your backers. There's more money available for new company endeavors than viable business concepts.

A fundamental rule of the game to learn: Any time you want to raise money, your first move should be to put up a proper prospectus.

This prospectus should include a CV of your past, education, training, experience and any other personal qualities that might be counted as an asset to your potential success. It's also a good idea to identify your various loans, what they were for, and your history in paying them off.

You'll have to describe how the money you desire will be used. If it's for an established business, you'll need a profit and loss record for at least the preceding six months, plus a plan outlining how this additional money will yield greater profits.

If it's a new firm, you'll have to exhibit your proposed business plan, marketing research and projected costs and as predicted income numbers, with a summary for each year, spanning at least three years.

Setting your expenditure estimations high and your revenue expectations on small returns will be advantageous. This will enable you to "ride through" the tremendous "ups and downs" inherent in any beginning firm. It would help if you highlighted what makes your business unique---how it varies from your competition and the opportunities for expansion or secondary items.

This prospectus will have to describe precisely what you're offering the investor in return for using his money. He'll want to know the percentage of interest you're willing to pay, whether monthly, quarterly or yearly. Are you offering a particular percentage of the profits? A percentage of the business? A position on your board of directories?

An investor spends his money to make additional money. He wants to make as much as he can, whether short-term or long-term, to draw him, intrigue him, and persuade him to "put up" the money you need. You'll not only have to offer him a possibility for enormous profits, but you'll have to lay it out in detail and, further, back up your statements with proof from your marketing study.

Venture investors are usually extremely accustomed to "high-risk" proposals. However, they all want to limit that risk as much as possible. Therefore, your prospectus should include a statement of your business and personal assets with documentation---usually copies of your tax returns for the past three years or more.

Your prospective investor may need to learn about you or your business, but if he wants to see, he can pick up his telephone and know everything there is to know within 24 hours. The point is, don't ever try to "con" a potential investor.

Be honest with him. Lay all the facts on the table for him. In most cases, if you've got a strong idea and done your homework properly, an "interested investor" will comprehend your position and offer more support than you dared to ask.

When you have your prospectus produced and know how much money you want, exactly how it will be spent, and how you intend to repay it, you're ready to start looking for investors.

One of the quickest ways of earning money is by advertising in a newspaper or a national publication featuring such ads. Your ad should indicate the quantity of money you want--always ask for more money than you have room for negotiating. Your ad should also explain the type of business involved ( to separate the curious from the actually interested) and the kind of return you're promising on the investment.

Take a page from the party plan merchandisers. Set up a party and invite your pals over. Explain your business concept, the profit potential, and how much you need. Give them each a copy of your prospectus and ask that they promise a thousand dollars as a non-participating partner in your business. Check with the current tax regulations.

You may be allowed up to 25 partners in Sub Chapter S enterprises, opening the door for anyone to gather a group of friends around oneself with something to give them in return for their aid in capitalizing his business.

You can also issue and sell up to $300,000 worth of stock in your company without going through the Federal Trade Commission.

You'll need the services of an attorney to do this; however, of course, a decent tax accountant would be good.

Having an attorney and accountant help you make out your business prospectus is always a good idea. As you explain your plan to them and ask for their advice, discreetly ask them if they'd mind letting you know of, or steer your way, any potential investors they might encounter.

Do the same with your banker. Give him a copy of your prospectus and ask him if he'd look it over, make any recommendations for enhancing it, and let you know of any potential investors. In either case, it's always a good idea to let them know you're willing to pay a "finder's fee" if you can be guided to the correct investor.

Professional workers such as doctors and dentists are known to be predisposed to join occupational investing clubs. The next time you talk with your doctor or dentist, offer him a prospectus and explain your plan.

He may want to invest on his own or set up an appointment for you to chat with the manager of his investment group. Either way, you win because you must get the word out to as many potential investors as possible while looking for money.

Remember to consider the prospects of the Small Business Investment Companies in your neighborhood. Look them up in your telephone book under "Investment Services." These corporations exist to lend money to businesses with a good chance of making money. They often trade their help for a small investment in your company.

Many states have Business Development Commissions whose objective is to aid in forming and growing new firms. Not only do they offer favorable taxes and business knowledge, but most also offer money or facilities to help a new firm get started. Your Chamber of Commerce is where to check for further information concerning this proposal.

Industrial banks are normally considerably more inclined to make business loans than regular banks, so check out these institutions in your area. Insurance companies are major sources of long-term business finance, but each company varies its policies about the type of business it will consider.

Check your local agent for the name and address of the person to contact. It's also extremely possible to get the directories of another firm to invest in your business. Look for a company that can profit from your product or service. Also, check at your public library for available foundation funds.

These can be the last answer to all your money needs if your business is regarded as tied to the foundation's objectives and activities.

Finally, there's the Money broker or Finder. These people circulate your prospectus with various known lenders or investors. They always need an up-front or retainer fee, and there's no way they can guarantee to get you the loan or the money you desire.

There are many really good money brokers, and some could be better. They all take a proportion of the gross amount finally purchased for your wants. The main thing is to check them out properly; find out about the successful loans or investment plans they're organized and what kind of investor contacts they have---all of this before you put up any front money or pay any retainer fees.

There are several ways to raise money---from staging garage sales to selling stocks. Make sure to assume that the only place you can find the money you need is through the bank or finance firm.

Start thinking about allowing investors to share in your firm as silent partners. Consider the possibility of obtaining financing for a primary business by arranging financing for another firm that will support the primary industry's start-up, establishment and growth.

Consider the possibilities of merging with a company that's already organized and with comparable or relevant facilities to your needs. Consider the prospects of obtaining the people supplying your production equipment to co-sign the loan you need for start-up funding.

Remember, there are hundreds upon thousands of ways to obtain business start-up money. This is certainly the age of creative financing.

Disregard the stories you hear about "tight money" and start making phone calls, talking to individuals, and scheduling meetings to discuss your plans with those with money to invest. There's more money now than ever for a new business investment.

The difficulty is that most contemporary "business builders" don't know what to believe or where to turn for help. They prefer to think of the reports of "tight money," they set aside their dreams for a business of their own until start-up money is easier to get.

The truth is this: Now is the moment to make your move. Now is the time to act. A person with a truly feasible business plan and determination to succeed will make use of every possible idea that can be imagined. And the ideas I've presented here should serve as just a few of the endless sources of monetary help available and ready for you!

Post a Comment