Finding Cash For Your Business

Entrepreneurs who are shut out by bankers and venture capitalists can stay in the game by finding alternate sources of financing

can use these techniques when you need money right now,” says Lloyd C. Grant, publisher of the New York-based The KIP Business Report. “They’re expensive, though — you might wind up paying 4.5% a month. In some areas, you might be able to find a nonprofit organization that charges much less, say 1.5% a month. Check to see if there’s a local business opportunity center.”

DIVINE INSPIRATION
Lloyd says that business owners usually are better off if they can find angel financing, rather than incur the high costs of accounts receivable financing, month after month. “Some entrepreneurs are reluctant to look for angels because they think an angel will take control of the company. In truth, angels generally don’t want to run your business. They’re looking to get involved in an interesting project and have a chance to make a large return on their investment. Even if an angel gets some equity in your company, you can remain in control.” What’s more, an angel may provide know-how as well as cash.

“You might be a great baker,” says Lloyd, “but not a salesperson. By teaming up with an angel who knows marketing, you may allow your business to grow much more rapidly than you anticipated.”

According to Lloyd, angel financing can be a more practical goal for a small-business owner, compared with venture capital. “Often,” he says, “venture capital comes from groups who want to make large investments, especially in sexy areas such as high-tech.” Small companies in other industries, though, may have a chance of attracting an angel.

“There are many capable individuals who are interested in being angels,” says Lloyd. “They might be willing to make investments as small as $30,000, if they like your business strategy and relate to you on a personal level. A potential angel may ask more questions about your background and your beliefs, less about your projected profits and your credit score.”

SOMETHING VENTURED
In some situations, private equity firms and venture capitalists also go where angels are willing to tread. The National Association of Investment Cos. is the industry association for investment companies serving an ethnically diverse marketplace. NAIC (www.naicvc.com) offers a Private Equity Link service to help entrepreneurs find equity capital. For a nonrefundable fee of $250, company information is posted for 90 days, during which time NAIC member firms can review the opportunity, contact the entrepreneur, and, if interested, begin the process of making an investment.

The community development venture capital industry, which includes over 100 members, explicitly supports companies located in low-income and distressed neighborhoods.

“Traditional venture capital funds tend to focus on a limited portion of the U.S.,” says Kerwin Tesdell, president of the Community Development Venture Capital Alliance in New York City. &
quot;There’s a focus on certain types of companies, especially in high-technology fields, and a desire to make very large investments.”

“Our members have the same focus on potentially strong investment returns,” says Tesdell, whose organization acts as the trade association for this group of venture capitalists, “yet we are willing to make an extra effort

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