Wednesday, 4 September 2013

HOW TO RAISE MONEY FOR STARTING A BUSINESS




The task of raising money for a 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.





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!

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