Raising Capital For Business

Raising capital for business is a real challenge for the entrepreneur who has a great product or marketing plan but not enough green to go with the big plans. Then again, perhaps the entrepreneur's enterprise has been off the ground the years but tough times have brought the cash flow to almost a halt. In either case, locating cash for commercial purposes can be the biggest challenge of all, especially during cyclical down turns which always happen from period to period. For the commercial venture that is already in business, finding cash for the times of slow growth may be the difference between staying open and closing up shop. And great dreams can die when no one else is convinced that the vision is worth the investment. Jesus likened building one's life on anything besides the salvation He offers for eternal life as constructing a large house on sand. "And everyone that that heareth these sayings of mine and doeth them not shall be likened unto a foolish man which built his house upon the sand and the rain descended and the floods came and the winds blews and beat upon that house and it fell and great was the fall of it." (Matthew 7: 26, 27)

When thinking about raising capital for business the regular questions have to be asked even though the answer is probably yes. First, the issue about where the entrepreneur has looked for cash must be explored. Often times one's personal property is deemed off limits by either the owner or his or her spouse. That's quite understandable because we all want our personal lives to be untouched by the traumas of running a commercial endeavor. But in the process of deciding what is most important, we have to make the conscious decision about how much we believe in this venture and how much we are willing to stake to make it go. Raising capital for business may come down to an intimate discussion with one's spouse about putting up house, vehicle, bank assets, retirement funds and every other piece of property one owns. This very important discussion and final decision should not be unilaterally, but rather as a decision by both husband and wife.

Plenty of media coverage has been given to the topic of venture capitalists over the past fifteen or twenty years. These ultra wealthy individuals usually ban together to front tens of millions of dollars to small drug companies and high tech enterprises until their research and development bears fruition. This is often ten years or more in the future, but when the companies finally come forth with their IPO, the venture capitalist stands to rake in incredible profits. If you are a small enterprise owner you will have already been approached by one or more venture capitalists if one's business is what they are looking for in terms of investment opportunities. These investors are ravenous in terms of hunting down potential companies with which to invest. Raising capital for business from venture capitalists is not for everyone because the VC usually wants to sit in the board of the company and have plenty of say in the direction of the company during the years of R and D.

So if the VC has not already scoped your business out, chances are your company isn't the kind of opportunity for which he is looking. But there are some other options, if the banks and the credit union have already said no to your requests. Consider first the world of the hard money lender, a wealthy person who lives in your area of the country, probably very nearby. This individual is a person who keeps his or her ear to the ground in terms of listening to the pulse of local business. Whether your business has been around for a while, or just in the early throws of start up, chances are this hard money lender already know about it, because that is how he makes more money. Raising capital for business opportunities is music to this lender's ears because he is going to make a tone of cash on your dire predicament.

In the case of a hard money lender, your need for raising capital for business is his opportunity to provide a bridge loan, probably between six months and two years for your enterprise needs. This lender is not in it for the long haul, but rather just for a short trip around the block and this money will not be without expense or strings. In most cases, the hard money lender will name his price for the loan and is not influenced at all by federal or state banking restrictions because it is private money with which the transaction will be funded. The interest rate could be as much as twenty five or thirty percent and may also cost a handling fee of several points upfront. Additionally, the hard money lender may want the business owner to put up his house and other personal collateral as part of the cost of raising capital for business.

There is another source of funding for a business that is outside the traditional brick and mortar places of the past. Angel investors, who may or may not be as demanding as hard money lenders are also a possibility for an enterprise owner or entrepreneur who is raising capital for business purposes. Angel investors are usually not as wealthy as hard money lenders and often join with other similar investors in order to provide larger sums of money for venture enterprises. An angel investor, who can be found online, is usually a successful enterprise owner who will want to see a very smart and savvy business plan before granting any loans. The angel investor is usually willing to fund for, longer periods of time then the hard money lender. Additionally, the angel investor is often a great source of enterprise advice and instruction.

Raising Business Capital

Raising business capital is usually the biggest quandary for an entrepreneur who wants to build a business from the ground up. And sometimes when the cash flow is slow in an already established business, it is equally as important and just as much as riddle. When a person really believes in his business plan and believes in the long time viability of the market, not being able to get enough money to make it happen is one of life's great disappointments. There are plenty of people who may want to loan someone money, but the problem is that the person who needs the money may not be worthy of the loan. And when economic downturns come, and they always do, getting start up money or a cash infusion gets exponentially harder.

The closest resources for money should be tapped first if the goal of raising business capital is urgent. Many entrepreneurs have loving and supportive spouses who have agreed to put their own personal homes up as collateral for a business loan. If this has been a last resort move for you, is it now time to do so? Of course doing this without consulting your wife or husband is a violation of marriage vows in the strictest sense of the word and should be avoided at all costs. Nothing in life is worth the destruction of a marriage union. The there may be some relatives who might be willing to help front money for the new project or to keep a business afloat. This is always a ticklish subject when money between family members is exchanged, but they may be more willing to do it than you realize. And then there is always the possibility of selling off property that a person owns, including possession in one's home, but again, it needs to be an agreement between marriage partners.

The two biggest sources for private help in raising business capital come from angel investors and hard money lenders. These are usually the last stops on the road to trying to raising business capital within the very accepted parameters. When economic times are harder, the banks are very skittish about loaning depositors' money and the credit unions aren't very far behind. Both of the lenders will require quite high credit scores but the credit union may be a little more lenient with some issues. They tend to take a holistic approach when examining the credit worthiness of prospective borrowers. When God examines us for worthiness into heaven, none of our good works or our good intentions will matter. "If thou shalt confess with thy mouth the Lord Jesus and shalt believe in thine heart that god hath raised him from the dead, thou shalt be saved." (Romans 10: 9)

So first consider what is known as an angel investor. An angel investor will probably be but may not be a highly wealthy person, and may not even live in your town or geographic area. Angel investors are eleven times as likely to help a business owner is raising business capital as would be venture capitalists. They have in the past invested over fifty billion dollars in American businesses of differing sorts. Angel investors usually take quite a personal interest when they help an entrepreneur in raising business capital. Most of them are quite willing to be a close advisor and can be a tremendous asset in not securing the money needed but also in helping to move the company along. Angel investors tend to run in packs; they often join forces in order to minimize their risk with any one company.

There are plenty of online resources to find angel investors. Since there are so many of them around the country, you'll probably want to find one that not only helps in raising business capital, but also knows your particular commercial field quite intimately. An angel investor, if he or she makes the transaction a loan, will not be cheap in terms of interest. While the hard money lender is only interested in a short term lending agreement, often no more than eighteen months in length, the angel lender might extend his or her involvement with your company out over five years or more. If there is not a high rate interest on the loan, there may be a request for equity in the company itself, not unlike venture capitalists who usually are looking for biotech companies and deals in the hundreds of millions of dollars. The venture capitalist usually seeks out the company he or she wants to associate with, more than likely a company that need research and development money to perfect a drug or some high tech piece of equipment.

The other candidate for raising business capital is the hard money lender. This is usually a solo person living in the area where you live. This very wealthy person will probably already know about your enterprises if they are already in operation, and may even know about your start up aspirations. This person keeps an ear to the ground all the time, keeping apprised of the local business climate the way a rancher watches over his herds. This person, if he deems your business worthy, will propose a bridge loan for about eighteen months and the interest rate will be very high. In getting a proposal for commercial capital from a hard money lender, the borrower will probably be asked to put up any and all personal and commercial property as collateral. This lender will want to know you have seriousness about your ambitions.

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