The common questions for anyone who want to start business are: How
to raise money to start business, and where to get money for my
business?
To
raise money to start business is not as difficult as most people seem
to think. This is especially true when you have an idea that can make
you and your backers rich. Actually, there's more money available for
new business ventures than there are good business ideas. We will help
you for where you can get money for business.
A very important
rule of the game to learn: Any time you want to raise money, your first
move should be to put together a proper prospectus.
This
prospectus should include a resume of your background, your 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
list the various loans you've had in the past, what they were for, and
your history in paying them off.
You'll have to explain in detail
how the money you want is going to be used. If it's for an existing
business, you'll need a profit and loss record for at least the
preceding six months, and a plan showing how this additional money will
produce greater profits. If it's a new business, you'll have to show
your proposed business plan, your marketing research and projected
costs, as well as anticipated income figures, with a summary for each
year, over at least a three year period.
It'll be advantageous to
you to base your cost estimates high, and your income projections on
minimal returns. This will enable you to "ride through" those extreme
"ups and downs" inherent in any beginning business. You should also
describe what makes your business unique---how it differs form your
competition and the opportunities for expansion or secondary products.
This
prospectus will have to state precisely what you're offering the
investor in return for the use of his money. He'll want to know the
percentage of interest you're willing to pay, and whether monthly,
quarterly or on an annual basis. Are you offering a certain percentage
of the profits? A percentage of the business? A seat on your board of
directories?
An investor uses his money to make more money. He
wants to make as much as he can, regardless whether it's short term or
long term deal. In order to attract him, interest him, and persuade him
to "put up" the money you need, you'll not only have to offer him an
opportunity for big profits, but you'll have to spell it out in detail,
and further, back up your claims with proof from your marketing
research.
Venture investors are usually quite familiar with "high
risk" proposals, yet they all want to minimize that risk as much as
possible. Therefore, your prospectus should include a listing 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 not know anything about you or your business, but if he wants to
know, he can pick up his telephone and know everything there is to know
within 24 hours. The point here 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 good idea and you've done your homework
properly, and "interested investor" will understand your position and
offer more help than you dared to ask.
When you have your
prospectus prepared, know how much money you want, exactly how it will
be used, and how you intend to repay it, you're ready to start looking
for investors.
As simple as it seems, one of the easiest ways of
raising money is by advertising in a newspaper or a national publication
featuring such ads. Your ad should state the amount of money you
want--always ask for more money than you have room for negotiating. Your
ad should also state the type of business involved ( to separate the
curious from the truly 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 friends over. Explain your
business plan, the profit potential, and how much you need. Give them
each a copy of your prospectus and ask that they pledge 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 himself with something to offer them in return for their
assistance 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 help of an attorney to do
this, however, and of course a good tax accountant as well wouldn't
hurt.
It's always a good idea to have an attorney and an
accountant help you make up your business prospectus. As you explain
your plan to them, and ask for their advice, casually ask them if they'd
mind letting you know of, or steer your way any potential investors
they might happen to meet. Do the same with your banker. Give him a copy
of your prospectus and ask him if he'd look it over and offer any
suggestions for improving it, and of course, 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 directed to
the right investor.
Professional people such as doctors and dentists are known to have a
tendency to join occupational investment groups. The next time you talk
with your doctor or dentist, give him a prospectus and explain your
plan. He may want to invest on his own or perhaps set up an appointment
for you to talk with the manager of his investment group. Either way,
you win because when you're looking for money, it's essential that you
get the word out as many potential investors as possible.
Don't
overlook the possibilities of the Small Business Investment Companies
in your area. Look them up in your telephone book under "Investment
Services." These companies exist for the sole purpose of lending money
to businesses which they feel have a good chance of making money. In
many instances, they trade their help for a small interest in your
company.
Many states have Business Development Commissions whose
goal is to assist in the establishment and growth of new businesses. Not
only do they offer favorable taxes and business expertise, most also
offer money or facilities to help a new business get started. Your
Chamber of Commerce is the place to check for further information of
this idea.
Industrial banks are usually much more amenable to
making business loans than regular banks, so be sure to check out these
institutions in your area. insurance companies are prime sources of long
term business capital, but each company varies its policies regarding
the type of business it will consider. Check your local agent for the
name and address of the person to contact. It's also quite possible to
get the directories of another company to invest in your business. Look
for a company that can benefit from your product or service. Also, be
sure to check at your public library for available foundation grants.
These can be the final answer to all your money needs if your business
is perceived to be related to the objectives and activities of the
foundation.
Finally, there's the Money broker or Finder. These are
the people who take your prospectus and circulate it with various known
lenders or investors. They always require an up-front or retainer fee,
and there's no way they can guarantee to get you the loan or the money
you want.
There are many very good money brokers, and there are
some that are not so good. They all take a percentage of the gross
amount that's finally procured for your needs. The important thing is to
check them out fully; find out about the successful loans or investment
plans they're arranged, 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 many ways to raise money---from staging garage
sales to selling stocks. Don't make the mistake of thinking that the
only place you can find the money you need is through the bank or
finance company.
Start thinking about the idea of inviting
investors to share in your business as silent partners. Think about the
idea of obtaining financing for a primary business by arranging
financing for another business that will support the start-up,
establishment and developing of the primary business. Consider the
feasibility of merging with a company that's already organized, and with
facilities that are compatible or related to your needs. Give some
thought to the possibilities of getting the people supplying your
production equipment to co-sign the loan you need for start-up capital.
Remember,
there are thousands upon thousands of ways to obtain business start-up
capital. This is truly the age of creative financing.
Disregard
the stories you hear of "tight money," and start making phone calls,
talking to people, and making appointments to discuss your plans with
the people who have money invest. There's more money now than there's
ever been for a new business investment. The problem is that most
beginning "business builders" don't know what to believe or which way to
turn for help. They tend to believe the stories of "tight money," and
they set aside their plans for a business of their own until a time when
start-up money might be easier to find.
The truth is this: Now is
the time to make your move. Now is the time to act. the person with a
truly viable business plan, and determination to succeed, will make use
of every possible idea that can be imagined. And the ideas I've
suggested here should serve as just a few of the unlimited sources of
monetary help available and waiting for you!
Now you should get
idea for how to raise money to start business, how to get money for
business, and where to get money for my business.
