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: Anytime 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 (see our report #3503), 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 from your
    competition, and the opportunities for expansion or secondary products.

    The 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 directors? Remember: the investor is seeking as much as
    he can get in return for the use of his money, regardless whether it's a short term
    or long term deal. In order to attract, interest, 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. Further, back up your claims with proof from your
    marketing research.

    Venture investors are usually quite familiar with "high risk" proposals, and 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 last 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 discover everything there is to
    know within 24 hours. The point 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, an 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 need so you'll 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 lesson from the party plan merchandisers. Set up a party and invite your
    friends over. Explain your business plan, the profit potentials, and how much you
    need. Give them each a copy of your prospectus and ask that they pledge a
    thousand dollars as a nonparticipating partner in your business. Check the
    current tax regulations. You may be allowed up to 25 partners in SubChapter 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. However, 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, ask that he let you know
    of any potential investors he or she may come across. 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. When you're looking for money, it's
    essential that you get the word out to 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 becoming successful. 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 local Chamber of Commerce is the place to
    check for further information on 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 types of businesses it will consider. Check with
    your local insurance agent for the name and address of the person to contact.
    Also, it's often possible to get the directors of another company to invest in your
    business. Look for a company that can benefit from your product or service. 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, you may want to enlist the services of a money broker or finder. These are
    people who take your prospectus and circulate it among various known lenders or
    investors. They always require an up front 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've arranged, and what kind of investor contacts they have.
    Do 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. Many foreign investors have money to invest in American and North
    American companies. 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. Consider obtaining financing for a primary business by arranging
    financing for another business that will support the start-up, establishment, and
    development 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
    startup 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 to
    invest. There's more money now than there's ever been for 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 startup money might be easier to find. The truth is, now is the time to make
    your move. Now is the time to act. The person with a truly viable business plan
    and the determination to succeed will make use of every possible idea that can
    be imagined. The ideas suggested here should serve to propel you toward the
    unlimited sources of monetary help available and waiting for you!


  
I hope this information helps you in your business endeaver.You may copy and print this article. For more information read Reynold Jay's book    How To Think Small Business For Big Profits  and Born To Be Rich for business motivation. (CLICK for more information.)