Business Start Up Capital
Business start up capital is the desire of many entrepreneurs both when times are good and when they are tough, economically speaking. From the guy who wants to start his own lawn mowing service to the Harvard grad that is going after her own commercial consulting firm, money is essential to a successful business start. When the country goes through economic downtimes, entrepreneurs have to get creative with sources of start up revenue. Many of the traditional sources of venture capital get very tight with their loan restrictions during recessionary periods, so finding money from other sources may have to be located. And of course, there are some other issues besides the availability of funds that come into play. For many providers of venture finances, the qualifications for obtaining business start up capital can rise to stratospheric heights.
Traditional banks have always been one of the most popular places to go for money needed for new businesses. These brick and mortar lending institutions have been business friendly for decades and have provided much needed capital to many deserving men and women who had the American Dream in their frontal lobes. Banks have always offered the lowest rates for their money, but have required the most fiscally fit individuals to be the beneficiaries of their lending funds. A smart and savvy business plan is certainly a premier requirement to get a loan from any capital resource today, but none more mandatory than with an FDIC insured commercial bank. But during economic drawback times that occur every seven to ten years, even the finest and most innovative business plans are not enough to get business start up capital from some banks. It may take a person who has a credit score and history of 750 to even be considered for an interview. And since the average median score is 723 and only 18% of all Americans have a score of 750 or more, many well deserving capitalists who want to get a slice of the pie will be unable to do so, at least when it comes to banks.
Should the person looking for business start up capital fail to convince their longtime banker friend to extend a loan, the next stop may be the neighborhood credit union. Changing from practices of the past when credit unions were strictly for those who first formed them, such as government workers, union laborers or teachers, today's credit unions often only require that a person be a resident of the county in which the CU does business. A CU, in loaning business start up capital, may have a slightly lower FICO score requirement and is more likely to take a slightly more holistic approach when examining the credit worthiness of a potential borrower. The CU may consider the job someone has and how long that job has been held, the amount of education a person has and other information pertinent to that particular CU. Jesus made it very clear that God's requirements for entrance into heaven are not based on portfolios, business success or even a religious life: " Verily, verily I say unto thee, except a man be born again, he cannot see the kingdom of God." (John 3:3)
There are probably three sources of non-traditional money for business start up capital that ought to be explored if these other sources are unresponsive to requests. The first would be venture capital providers, who are usually a consortium of angel lenders and big money individuals looking for a large profit over an extended period of time. In most cases, venture capitalists actually seek out particular entrepreneurial models to offer large amounts of money in return for at least part of the company's control. These business models are quite often high tech commercial or bio-medical companies that have very promising futures but need research and development money to make the products viable. This R and D period is often an extended period of time, five to ten years into the future, and during that time the venture capitalists seek to have a large voice in the company's operations. For many computer and drug companies that will one day go public and make hundreds of millions of dollars through public stocks, the sorely needed R and D money is the only way they can ever be successful. Giving up a great deal of company control can be a very disconcerting prospect, and many companies have disintegrated over the power struggles that ensue as a result.
While most venture capitalists will find targeted businesses, other much more low tech entrepreneurs must find other private sources for their business start up capital needs. Let's consider two sources of business start up capital that a very aggressive and savvy real estate broker who wants to branch out into developing land would go for help. One hundred acres of prime land just outside of town is just about to come on the market with an asking price of 1.3 million dollars. The land is so perfect for higher end home sites that she knows that the land will snatched up quickly if she does not move on it right away. She knows the banks will not help her because of some business problems she has had in the past.
She immediately seeks two types of lenders out who often provide start up money. Angel investors usually run in packs, and look for deserving businesses with whom to invest for five to ten years. The average angel investor usually invests between twenty and forty thousand dollars and if enough of these lenders can help her, she will have enough for a down payment and also raise enough for development. A hard money lender, usually an individual, may give the woman a bridge loan for very high interest rates and for a short period of time, usually no more than 18 months. The hard money investor may also ask her to put up her own home as collateral.
Capital Fundraising CampaignA capital fundraising campaign for a nonprofit organization requires a lot of planning, but can be very successful, and not overwhelming if every phase of it is managed in an orderly and well-considered manner. Both the feasibility and process of raising funds must be determined early on. A meeting that brings together the leadership of the organization, previous donors, potential donors, and community leaders, where the case is presented, is one way to begin raising monies. Attendees would be given the resources currently available, the ultimate goal to be reached, and in the case of a building, the architectural drawing of the proposed structure. The reasons for the need (current and expected growth), and what it will do for the community are explained to everyone's satisfaction.
Often, an outside company is hired whose profession is conducting building fundraising campaigns. They will do the interviewing and "pitching" of the cause to potential donors, and follow through until initial pledges are made and met. After the process is in place, the nonprofit organization then takes on the responsibility of collecting on those pledges. Where a church is needing a new fellowship hall or sanctuary, a capital fundraising campaign is the way the majority of the money is raised. There may be some help from the District or Diocesan office for the rest, which must be paid off by pledges. When the nonprofit organization is a community entity such as a hospital, the public venue can be used to raise funds. Capital fundraisers of this kind draw from a far wider pool of donors than a church. Statistically speaking, the major gifts that start off a program make up 70% to 80% of funds raised. For a church, however, major gifts may only raise 50% or less.
The smaller organization, such as a church congregation can hold a variety of fundraising events to raise money for their building fundraising campaigns. Church dinners open to the public are always well received, and auctions can bring considerable money if there some pricey items donated. Entertainment events can draw large crowds, especially if the entertainers donate their time or agree to a lower-than-usual rate for their services. Families sometimes offer special gifts taken up at family reunions, or make a gift from a member's estate. The one constant in a church capital fundraising campaign is the pledge. Every member is expected to share some part of the burden, and that is the way to do that.
Ideas that involve the community allows every organization in that community to do something to help. Auctions, art events, golf tournaments, etc. can be quite successful at bringing in sizeable sums of money for that new hospital or library. Grand social events like a Christmas Gala can draw a lot of people who are willing to spend money for the cause. Receptions hosted by prominent people in the community will often open pocketbooks for a capital fundraising campaign.
Marathons have been used to raise money, and bicycle tours. People are willing to get pledges from friends for the miles they run or ride to raise money for a cause they believe in. The capital campaign can be completed in as little as three to six months for a church, or take several years with a hospital, library, or other large nonprofit. The pledges will likely take three to five years to be paid off.
Where large nonprofits are conducting a major fundraiser, the trick is to try to time them so that they don't coincide with another campaign, so that the community is not divided. While a church doesn't have to be concerned with whether or not another church is having a similar campaign, a capital fundraising campaign could coincide with other important financial needs of the parish, making it difficult for people to give proper attention to both. Sometimes this can't be helped, but when possible, it's a good idea to try to spread things out so members can concentrate on one thing at a time. Nonprofits always struggle for funds, no matter what their function may be, so when major expenses loom there is an added challenge to their dedication and persuasive talents.
Raising money is never easy, but it can be very successful when the need and the goals are clearly stated to the participants, and where everyone is made to understand they have a stake in the success of the project. So whether it's a larger sanctuary that will relieve the overcrowding, or a new hospital with state-of-the-art tools for diagnosis and treatment, or a new library that is inviting to the community, building fundraiser campaigns are a necessary part of growth for nonprofit organizations. The fact that nonprofits are growing should give impetus to the community to do its part.