How To Raise Money For Starting A Business

The task of raising money for a business is not as difficult asmost people seem to think. This is especially true when you havean idea that can make you and your backers rich. Actually,there's more money available for new business ventures than thereare good business ideas.
A very important rule of the game to learn: Any time you want toraise money, your first move should be to put together a properprospectus.
This prospectus should include a resume of your background, youreducation, training, experience and any other personal qualitiesthat might be counted as an asset to your potential success. It'salso a good idea to list the various loans you've had in thepast, what they were for, and your history in paying them off.
You'll have to explain in detail how the money you want is goingto be used. If it's for an existing business, you'll need aprofit and loss record for at least the preceding six months, anda plan showing how this additional money will produce greaterprofits. If it's a new business, you'll have to show yourproposed business plan, your marketing research and projectedcosts, as well as anticipated income figures, with a summary foreach 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 enableyou to "ride through" those extreme "ups and downs" inherent inany beginning business. You should also describe what makes yourbusiness unique---how it differs form your competition and theopportunities for expansion or secondary products.
This prospectus will have to state precisely what you're offeringthe investor in return for the use of his money. He'll want toknow the percentage of interest you're willing to pay, andwhether monthly, quarterly or on an annual basis. Are youoffering a certain percentage of the profits? A percentage of thebusiness? A seat on your board of directories?
An investor uses his money to make more money. He wants to makeas much as he can, regardless whether it's short term or longterm deal. In order to attract him, interest him, and persuadehim to "put up" the money you need, you'll not only have to offerhim an opportunity for big profits, but you'll have to spell itout in detail, and further, back up your claims with proof fromyour marketing research.
Venture investors are usually quite familiar with "high risk"proposals, yet they all want to minimize that risk as much aspossible. Therefore, your prospectus should include a listing ofyour business and personal assets with documentation---usuallycopies of your tax returns for the past three years or more. Yourprospective investor may not know anything about you or yourbusiness, but if he wants to know, he can pick up his telephoneand know everything there is to know within 24 hours. The pointhere is, don't ever try to "con" a potential investor. Be honestwith 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 offermore help than you dared to ask.
When you have your prospectus prepared, know how much money youwant, exactly how it will be used, and how you intend to repayit, you're ready to start looking for investors.
As simple as it seems, one of the easiest ways of raising moneyis by advertising in a newspaper or a national publicationfeaturing such ads. Your ad should state the amount of money youwant--always ask for more money than you have room fornegotiating. Your ad should also state the type of businessinvolved ( 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 andinvite your friends over. Explain your business plan, the profitpotential, and how much you need. Give them each a copy of yourprospectus and ask that they pledge a thousand dollars as anon-participating partner in your business. Check with thecurrent tax regulations. You may be allowed up to 25 partners inSub Chapter S enterprises, opening the door for anyone to gathera group of friends around himself with something to offer them inreturn for their assistance in capitalizing his business.
You can also issue and sell up to $300,000 worth of stock in yourcompany without going through the Federal Trade Commission.You'll need the help of an attorney to do this, however, and ofcourse a good tax accountant as well wouldn't hurt.
It's always a good idea to have an attorney and an accountanthelp you make up your business prospectus. As you explain yourplan to them, and ask for their advice, casually ask them ifthey'd mind letting you know of, or steer your way any potentialinvestors they might happen to meet. Do the same with yourbanker. Give him a copy of your prospectus and ask him if he'dlook it over and offer any suggestions for improving it, and ofcourse, 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 tohave a tendency to join occupational investment groups. The nexttime you talk with your doctor or dentist, give him a prospectusand explain your plan. He may want to invest on his own orperhaps set up an appointment for you to talk with the manager ofhis investment group. Either way, you win because when you'relooking for money, it's essential that you get the word out asmany potential investors as possible.
Don't overlook the possibilities of the Small Business InvestmentCompanies in your area. Look them up in your telephone book under"Investment Services." These companies exist for the sole purposeof lending money to businesses which they feel have a good chanceof making money. In many instances, they trade their help for asmall interest in your company.
Many states have Business Development Commissions whose goal isto assist in the establishment and growth of new businesses. Notonly do they offer favorable taxes and business expertise, mostalso offer money or facilities to help a new business getstarted. Your Chamber of Commerce is the place to check forfurther information of this idea.
Industrial banks are usually much more amenable to makingbusiness loans than regular banks, so be sure to check out theseinstitutions in your area. insurance companies are prime sourcesof long term business capital, but each company varies itspolicies regarding the type of business it will consider. Checkyour local agent for the name and address of the person tocontact. It's also quite possible to get the directories ofanother company to invest in your business. Look for a companythat can benefit from your product or service. Also, be sure tocheck at your public library for available foundation grants.These can be the final answer to all your money needs if yourbusiness is perceived to be related to the objectives andactivities of the foundation.
Finally, there's the Money broker or Finder. These are the peoplewho take your prospectus and circulate it with various knownlenders or investors. They always require an up-front or retainerfee, and there's no way they can guarantee to get you the loan orthe money you want.
There are many very good money brokers, and there are some thatare not so good. They all take a percentage of the gross amountthat's finally procured for your needs. The important thing is tocheck them out fully; find out about the successful loans orinvestment plans they're arranged, and what kind of investorcontacts they have---all of this before you put up any frontmoney or pay any retainer fees.
There are many ways to raise money---from staging garage sales toselling stocks. Don't make the mistake of thinking that the onlyplace you can find the money you need is through the bank orfinance company.
Start thinking about the idea of inviting investors to share inyour business as silent partners. Think about the idea ofobtaining financing for a primary business by arranging financingfor another business that will support the start-up,establishment and developing of the primary business. Considerthe feasibility of merging with a company that's alreadyorganized, and with facilities that are compatible or related toyour needs. Give some thought to the possibilities of getting thepeople supplying your production equipment to co-sign the loanyou need for start-up capital.
Remember, there are thousands upon thousands of ways to obtainbusiness start-up capital. This is truly the age of creativefinancing.
Disregard the stories you hear of "tight money," and start makingphone calls, talking to people, and making appointments todiscuss your plans with the people who have money invest. There'smore money now than there's ever been for a new businessinvestment. The problem is that most beginning "businessbuilders" don't know what to believe or which way to turn forhelp. They tend to believe the stories of "tight money," and theyset aside their plans for a business of their own until a timewhen start-up money might be easier to find.
The truth is this: Now is the time to make your move. Now is thetime to act. the person with a truly viable business plan, anddetermination to succeed, will make use of every possible ideathat can be imagined. And the ideas I've suggested here shouldserve as just a few of the unlimited sources of monetary helpavailable and waiting for you!