| Raising Big Money | | | | usually not available through the government, but |
| Professional Investors | | | | often successful members of the minority set up |
| These are people who are looking to put serious | | | | funds to help others in their minority also succeed. A |
| money into a new product or business that has the | | | | simple internet search may help you find some of |
| potential to give them a good return. They may put | | | | these funds, or you can also contact minority media |
| anywhere from $50,000 to $1,000,000 into a project. | | | | outlets, like newspapers or websites, and they |
| Expect them to be very careful about where they | | | | probably know who offers such funds. |
| put their money and check and double check | | | | Sales/Leaseback |
| everything about your product and business. Also | | | | Real estate investors and equipment leasing |
| expect them to try to negotiate a deal that is good | | | | companies are often willing to buy your building or |
| for them. You can find these investors through other | | | | manufacturing assets and lease them back to you. |
| start-up companies, at entrepreneur clubs or venture | | | | Other Funding |
| conferences. | | | | Factoring |
| Venture Capitalists | | | | Factoring (also called receivables financing) companies |
| These are firms that invest in companies with | | | | buy your account receivables from you for 4% to |
| high-growth potential, experienced management and | | | | 8% off the face value. They then receive payment |
| a sound business plan. Often they are unwilling to | | | | as the client or customer pays. This can be very |
| invest in a company without a sales history, unless it | | | | expensive since you are giving up to 8% of the bill |
| is involved in an exciting new technology, and they | | | | to get the money two or three months in advance. |
| are not looking to make small investments--usually | | | | Cash Deposits |
| they invest $1,000,000 or more. To find these firms, | | | | Instead of just offering 30 day terms, you can |
| look for Pratt's Guide to Venture Capital Sources, | | | | require down payments, especially on custom made |
| which is a fairly comprehensive list of venture capital | | | | orders. These deposits will help your cash flow and |
| companies, at a larger public library. | | | | pay for the products your are producing to sell. |
| Private Placements | | | | Bank Loans |
| Private placements mean raising money by hiring a | | | | Banks always want collateral for their loans, and if |
| broker to sell stock, but not making the stock publicly | | | | don't have business collateral, they will want personal |
| available like on a stock exchange. The stock is sold | | | | collateral. Some of the most common bank loans are: |
| mostly to accredited investors, who make more than | | | | -installment loans, where you make a monthly |
| $200,000 a year (or $300,000 together with spouse, | | | | payment for a certain number of years |
| if married) or who have a net worth of more than $1 | | | | -term loans, where you repay the entire amount |
| million. This stock can be hard to sell and investors | | | | after a certain number of months or years |
| generally hope that you eventually go public with | | | | -asset based loans, for inventory or equipment |
| your company so they can sell their stock on an | | | | -revolving line of credit, which you can withdraw |
| exchange. Broker and legal fees for this can be | | | | when you need cash and repay when you have |
| considerable, for instance raising a $1 million or more | | | | extra cash |
| can easily cost you $250,000. | | | | SBA Loans |
| IPOs | | | | Small Business Administration loans are similar to bank |
| Initial Public Offerings (IPOs) are much like private | | | | loans, except the borrower doesn't need to offer |
| placements, except that your stock can be freely | | | | collateral because the government guarantees the |
| traded on stock exchanges. The timing of your IPO | | | | loan. These loans can also be easier to get than bank |
| is important for investors because it offers them the | | | | loans. |
| first time they can sell their stock and usually they | | | | Borrowing Money Off Orders |
| want you to go public when the company is doing | | | | With a big order from a reputable company, you can |
| well and is going public to raise money for a major | | | | often secure a term loan from a bank. Private |
| expansion. Before an IPO, you can only sell stock to | | | | investors also can offer you a short-term loan, but |
| people you know, or people someone in your | | | | they will charge you a much higher interest rate. |
| company knows, and to accredited investors, so an | | | | Tips to Consider |
| IPO opens you up to many more investors and gives | | | | Not all banks are equal, some of the smaller regional |
| you the potential to raise serious money. But the | | | | banks are much better loaning money to small |
| legal fees to offer an IPO are also very expensive, | | | | entrepreneurs than the bigger national and regional |
| typically well over $250,000. | | | | banks. Contact your local Small Business Development |
| SCOR | | | | Center to find out which local banks offer you the |
| If you don't have the money to set up a private | | | | best opportunity for a loan. Be sure to do all your |
| placement or an IPO, you can still sell stock publicly | | | | banking at a bank that is "small business friendly." |
| through the Small Corporation Offering Registration | | | | Do an internet search for Economic Development |
| (SCOR) program. Through this program you can raise | | | | Resources in your state. For example check out this |
| up to $1 million for a much lower cost because of the | | | | site for the state of Minnesota: Often towns will |
| reduced paperwork. | | | | have economic resources to help you get started. |
| Community/Minority Funding | | | | Sometimes if you look at smaller rural towns you |
| There is a huge amount of funding available for you | | | | might even find that the city has lined up some local |
| depending on what area you live in and what your | | | | business or investors to help you get started in your |
| ethnicity or religion is. Many cities and counties, | | | | town. |
| especially in rural areas, but also sometimes in the | | | | Always consider using exclusive agreements to get |
| inner-city, have economic initiatives to bring business | | | | cash. You can agree to make a product at a |
| and jobs to their area. These funds can be low- or | | | | manufacturer in return for the manufacturer picking |
| no-interest loans, tax breaks or even grants. | | | | up tooling costs and you might also be able to strike |
| Sometimes even if you are not located in an area | | | | an exclusive deal with a distributor to carry your |
| that offers these funds, you can still access these | | | | product in return for an upfront fee. You can also |
| funds if your manufacturer is located there. | | | | use exclusive agreements with distributors, |
| If you are part of a minority, either religious or | | | | manufacturers or vendors in return for an investment |
| ethnic, there are also funds available. These funds are | | | | in your company. |