How to Raise Capital

Business Plan

When the average person sees an advertisement for business opportunities, many of them think that they would love to own their own business…If only they had the money.

Anyone with a decent credit rating and a little inside sense of business can get the money needed for whenever it is needed and whatever it is needed for.

The first thing that you will need is a good and complete business plan. This will be an extremely detailed description of exactly how you are going to operate your proposed business. This business plan should include:

• Precisely detail the product or products you will be selling
• How you will be producing or manufacturing the product
• What the product is going to cost
• When will you expect to recoup the initial investment
• Your plans for growth or expansion
• Total dollar amount you will need to make it all work according to your plan.

Your business plan must be detailed and precise as banks and any other institutions will be going over it with a fine-toothed-comb. You should included projected income and expense figured through at least the first three years of business.

Capitalization Proposal

Whenever you are asking anyone for anything, especially for money, remember that you are basically involved in selling. You are selling yourself and you should prepare a ‘sales presentation' just as if you are getting ready to pitch a product to someone. You are pitching yourself to a lender.

In selling yourself, you must have all the data, you should be able to anticipate questions and objections the lender with have and you must be able to provide the lender with answers or explanations and do it to impress by presenting your business plan and yourself as the ‘package'.

The more money you need to ask for, the more question and the more lenders will need to know about you. How detailed you are. How prepared and knowledgeable you are, how you have documented your facts and figures and all should be very impressive to the lenders because the more they know about you, the more they will want to lend you money. They want to be sure you have done your homework and that you've researched everything and they want to be assured by your presentation that investing in your business will make money for them.

You will need a balance sheet that describes your net worth, or what you own compared to the amount of money you owe. You also will need to prove stability and that you have a talent for money-management, which can be seen by how successful you have been in paying off past obligations. If you have had credit problems in the past, the best idea is to get them cleaned up or at least explained on you file.

Once you have your balance sheet done, your credit history organized in a light favorable to you and your business, you are ready to start looking for lenders or investors.

Franchisors

Most franchisors offer help in setting up one of their franchises and some will go out of their way to assist you in getting the financing needed. Many will lend you the entire amount with payments coming out of the income they expect you to make from their franchise operation. Remember, this will be over and above the royalty payments you will be making to the franchisor on a monthly basis based on income.

The franchisors generally have two objectives; One, they like to expand their operation and increasing their profit and they are trying to raise capital for themselves. If you have a good credit history and they feel you have the ‘right stuff' to go into business, they will do everything within their power to get you in a franchise outlet. Remember, many of the largest corporations have started out on a shoestring and had to borrow money.

Second Mortgage

If you have a home you bought ten years ago for $95,000 and it is valued today and $195,000 and you have a mortgage of $35,000 still outstanding, a lender may consider your home to be security or collateral for a loan up to $160,000.

Taking a second mortgage on your home to finance a franchise is a major decision, but if you are sure about your investment project, and are determined to succeed, take the chance. Maybe you will want to incorporate yourself or borrow money from your family though a second mortgage and protect against the loss of your home through the Federal Homestead Act. All business opportunities involve risk and it is up to you to figure out if it is worth it.

Commercial Banks

All in all, commercial banks specialize in investment loans for going businesses, real estate construction and even venture programs so the best bet is to go to them for a loan rather than a local small town bank. One nice thing about commercial banks is that though they may not be able to approve a loan, they will usually give you a list of names of business people who might be interested in looking over your proposal for investment purposes. Some commercial banks offer investment lectures and seminars for the public. If you find one that does, it will probably be in your best interest to attend. You will learn something.

Advertising for Lenders

Whenever you are looking for money for a business, it really doesn't matter where you get it as long as the terms are satisfactory to you. Don't overlook the possibility of advertising for a lender or reaching out to people looking for investments. Look for grants, investment groups, trust companies and other groups or organizations looking for tax shelters.

Also, don't forget the Internet. The best o n-line credit search sites guarantee confidentiality, no up front fees and can point to successful results in hooking up companies like yours with legitimate lenders.