HOW TO RAISE MONEY FOR STARTING A BUSINESS

HOW TO RAISE MONEY FOR STARTING Aprospectus. As you explain your plan to them,and ask
BUSINESSfor their advice, casually ask them if they'd mind letting
Copyright © Kevin Purfieldyouknow of, or steer your way any potential investors
The task of raising money for a business is not asthey might happen to meet.
difficult as mostpeople seem to think. This is especiallyDo the same with your banker. Give him a copy of
true when you have an ideathat can make you andyour prospectus and askhim if he'd look it over and
your backers rich. Actually, there's moreoffer any suggestions for improving it,and of course, let
moneyavailable for new business ventures than thereyou know of any potential investors. In either case,it's
are good business ideas.always a good idea to let them know you're willing to
A very important rule of the game to learn: Anytimepay a "finder'sfee" if you can be directed to the right
you want to raise money,your first move should be toinvestor.
put together a proper prospectus.Professional people such as doctors and dentists are
This prospectus should include a resume of yourknown to have atendency to join occupational
background, your education,training, experience andinvestment groups. The next time you talkwith your
any other personal qualities that might be countedasdoctor or dentist, give him a prospectus and explain
an asset to your potential success. It's also a goodyour plan.
idea to listthe various loans you've had in the past,He may want to invest on his own or perhaps set up
what they were for, and yourhistory in paying theman appointment for youto talk with the manager of his
off.investment group. Either way, you winbecause when
You'll have to explain in detail how the money youyou're looking for money, it's essential that you get the
want is goingto be used. If it's for an existing business,wordout to as many potential investors as possible.
you'll need a profit andloss record for at least theDon't overlook the possibilities of the Small Business
preceding six months, and a plan showing howthisInvestment Companiesin your area. Look them up in
additional money will produce greater profits. If it's ayour telephone book under "Investment Services."
new business,you'll have to show your proposedThese companies exist for the sole purpose of lending
business plan, your marketing researchand projectedmoney to businesseswhich they feel have a good
costs, as well as anticipated income figures, with achance of making money. In many instances,they trade
summaryfor each year, over at least a three yeartheir help for a small interest in your company.
period.Many states have Business Development
It'll be advantageous to you to base your costCommissions whose goal is to assistin the
estimates high, and yourincome projections on minimalestablishment and growth of new businesses. Not only
returns. This will enable you to "ride thru"those extremedo they offerfavorable taxes and business expertise,
"ups and downs" inherent in any beginning business.most also offer money or facilitiesto help a new
You should also describe what makes your businessbusiness get started. Your Chamber of Commerce is
unique - how it differsfrom your competition, and thethe placeto check for further information on this idea.
opportunities for expansion or secondary products.Industrial banks are usually much more amenable to
This prospectus will have to state precisely whatmaking business loansthan regular banks, so be sure to
you're offeringthe investor in return for the use of hischeck out these institutionsin your area. Insurance
money. He'll want to knowthe percentage of interestcompanies are prime sources of long term
you're willing to pay, and whether monthly,quarterly orbusinesscapital, but each company varies its policies
on an annual basis. Are you offering a certainregarding the type of businessit will consider. Check
percentageof the profits? A percentage of theyour local agent for the name and address of
business? A seat on your boardof directors?theperson to contact. It's also quite possible to get the
An investor uses his money to make more money. Hedirectorsof an other company to invest in your
wants to make as muchas he can, regardlessbusiness. Look for a company thatcan benefit from
whether it's a short term or long term deal.your product or service. Also, be sure to check at
In order to attract him, interest him, and persuade himyourpublic library for available foundation grants. These
to "put up"the money you need, you'll not only have tocan be the finalanswer to all your money needs if your
offer him an opportunityfor big profits, but you'll have tobusiness is perceived to be relatedto the objectives
spell it out in detail, and further,back up your claims withand activities of the foundation.
proof from your marketing research.Finally, there's the Money Broker or Finder. These are
Venture investors are usually quite familiar with "highthe people whotake your prospectus and circulate it
risk" proposals,yet they all want to minimize that risk aswith various known lenders orinvestors. They always
much as possible. Therefore,your prospectus shouldrequire an up-front or retainer fee, and there'sno way
include a listing of your business and personalassetsthey can guarantee to get you the loan or the money
with documentation - usually copies of your tax returnsyou want.
for thepast three years or more. Your prospectiveThere are many very good money brokers, and there
investor may not know anythingabout you or yourare some that are notso good. They all take a
business, but if he wants to know, he can pick uphispercentage of the gross amount that's finallyprocured
telephone and know everything there is to know withinfor your needs. The important thing is to check them
24 hours.out fully;find out about the successful loans or
The point here is, don't ever try to "con" a potentialinvestment plans they've arranged,and what kind of
investor.investor contacts they have - all of this before you
Be honest with him. Lay all the facts on the table forputup any front money or pay any retainer fees.
him.There are many ways to raise money - from staging
In most cases, if you've got a good idea and you'vegarage sales to sellingstocks. Don't make the mistake
done your homeworkproperly, an "interested investor"of thinking that the only place you canfind the money
will understand your position and offermore help thanyou need is through the bank or finance company.
you dared to ask.Start thinking about the idea of inviting investors to
When you have your prospectus prepared, know howshare in yourbusiness as silent partners. Think about
much money you want,exactly how it will be used, andthe idea of obtaining financingfor a primary business by
how you intend to repay it, you're readyto start lookingarranging financing for another businessthat will support
for investors.the start-up, establishment and development of the
As simple as it seems, one of the easiest ways ofprimarybusiness. Consider the feasibility of merging
raising money is byadvertising in a newspaper or awith a company that'salready organized, and with
national publication featuring such ads.facilities that are compatible or relatedto your needs.
Your ad should state the amount of money you wantGive some thought to the possibilities of getting
- always ask for moremoney than you need so youthepeople supplying your production equipment to
have room for negotiating. Your ad shouldalso stateco-sign the loan you needfor start-up capital.
the type of business involved (to separate the curiousRemember, there are thousands upon thousands of
fromthe truly interested), and the kind of return you'reways to obtain businessstart-up capital. This is truly the
promisingon the investment.age of creative financing.
Take a page from the party plan merchandisers. SetDisregard the stories you hear of "tight money," and
up a party and inviteyour friends over. Explain yourstart making phonecalls, talking to people, and making
business plan, the profit potentials,and how much youappointments to discuss your planswith the people
need. Give them each a copy of your prospectus andwho have money to invest. There's more money now
askthat they pledge a thousand dollars as athanthere's ever been for new business investment.
non-participating partner in yourbusiness. Check withThe problem is that mostbeginning "business builders"
the current tax regulations. You may be allowedup todon't know what to believe or which wayto turn for
25 partners in Sub Chapter 5 enterprises, opening thehelp. They tend to believe the stories of "tight
door for anyoneto gather a group of friends aroundmoney,"and they set aside their plans for a business of
himself with something to offer themin return for theirtheir own until a timewhen start-up money might be
assistance in capitalizing his business.easier to find.
You can also issue and sell up to $300,000 worth ofThe truth is this: Now is the time to make your move.
stock in your companywith out going through theNow is the timeto act. The person with a truly viable
Federal Trade Commission. You'll need the helpof anbusiness plan, and determinationto succeed, will make
attorney to do this, however, and of course a gooduse of every possible idea that can be imagined.
tax accountantas well wouldn't hurt.And the ideas I've suggested here should serve as
It's always a good idea to have an attorney and anjust a few of the unlimitedsources of monetary help
accountant help youmake up your businessavailable and waiting for you!