How to Choose Business Financing.

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.

Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.

Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.[15]

Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

December 19, 2019

how to choose business financing

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.

Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.

Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.[15]

Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

December 18, 2019

How to Choose Business Financing

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.



Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.



Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.



Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

February 10, 2020

how to choose business financing

How to Choose Business Financing.

Every business needs funding for a variety of reasons, including startup, operations, equipment and project completion. Finance for business is a complex subject that must be approached from a variety of angles. There are many business financing options, some of which may or may not be right for your particular needs. In order to evaluate your situation and determine which finance avenues to pursue, there is a variety of factors to consider. Follow these guidelines to choose business financing.



Method 1 Arranging for a Loan.

1. Compare loans with other types of financing. Loans are a type of debt financing. This means that you have to pay the money back, plus interest. Loans are typically offered by banks, credit unions or other financial institutions. Businesses that typically qualify for loans have a strong business plan, favorable business credit rating and a fair amount of equity capital.

Equity capital is the current market value of everything the company owns less any liabilities owed by the company.

Lenders are sometimes hesitant to give loans to companies without a lot of equity capital. Without equity capital, businesses don't have much collateral to put up for a loan. Also, revenues earned by the business will go toward repaying the debt instead of growing the business.

2. Get a line of credit from a bank. A line of credit is different from a typical loan in that it doesn't give you a lump sum of cash. Rather, like a credit card, you withdraw from the available credit any time you need it. You only withdraw as much as you need. This gives you control over the amount of interest expense you will have to pay. A line of credit can help you control your cash flow as your expenses or income ebb and flow.

To qualify for a line of credit, be prepared to submit financial statements, personal tax returns, business tax returns, bank account information and business registration documents.

Annual reviews are required to maintain your line of credit.

3. Obtain a business loan from a bank. A business loan is like any other kind of term loan. Business loans come with fixed interest rates. You make monthly payments over a period of years until the loan is paid off. Unlike a line of credit, a term loan gives you a lump sum of cash up front. Businesses who are expanding their space or funding other large investments can benefit from a term business loan.

Before making a loan, lenders want to know what the loan is for and how you will spend the money. Be prepared to demonstrate that the loan is for a sound financial purpose.

Different lenders require different documents. In general, be prepared to produce: your personal and business credit history; personal and business financial statements for existing and startup businesses; projected financial statements; a strong, detailed business plan; cash flow projections for at least a year; and personal guaranties from all principal owners of the business.

Large banks tend to avoid working with small businesses. They don't want to do all of the work to underwrite a small loan that won't make a large profit for them.

Local banks with whom you already have done business or credit unions may be more willing to work with small businesses.

4. Apply for a commercial loan. A commercial loan is similar to a home equity loan. It is for businesses that own commercial real estate. You borrow against the equity you have in the commercial real estate you own. The amount you can borrow depends on the value of your property and how much equity you have.

Commercial loans are not backed by government entities like Fannie Mae, so lenders see these loans as risky. Therefore, they tend to charge higher interest rates for them. Also lenders scrutinize the business more closely as well as the real estate that will serve as collateral for the loan.

5. Request a Small Business Association (SBA) loan. These loans are given by participating banks and are guaranteed by the SBA. They are for businesses that might have trouble getting a traditional bank loan. The SBA guarantees a portion of your loan to repay if you default on your payments. Find a bank that works with SBA loans by visiting www.sba.gov/lenders-top-100. Use the application checklist (www.sba.gov/content/sba-loan-application-checklist) to make sure you have all of the necessary documentation.

SBA loans for starting and expanding a business include the Basic 7(a) Loan Program, the Certified Development Company (CDC) 504 Loan Program and the Microloan Program.

SBA also offers disaster assistance loans for businesses in a declared disaster area and economic injury loans for businesses that have suffered a physical or agricultural production disaster.

Export assistance loans help exporters obtain financing to support exporting activities or to compete if they have been adversely affected by competition from imports.

Veteran and military community loans help businesses meet expenses when an essential employee has been called up on active duty.

Other special purpose loans include CAPlines, which help businesses purchase capital equipment, pollution control loans for pollution control facilities, and the U.S. Community Adjustment And Investment Program (CAIP), for businesses that have been adversely affected by the North American Free Trade Agreement (NAFTA).

6. Work with state and local economic development agencies. Economic development agencies exist in every state and in some local municipalities. They provide low-interest loans to businesses that might not qualify for traditional bank loans. In addition to financial services, these agencies provide startup advice, training, business location selection assistance and employee recruitment and training assistance. You can find the economic development agency in your state by visiting www.sba.gov/content/economic-development-agencies. You can also contact your city or county government office to find out about their economic development programs.

Each agency has its own application process. However many require the same basic documentation. Gather the following information.

A loan application form that details why you are applying for the loan and how you will use the money.

Your resume gives lenders information about your expertise in the field.

All lenders will require a sound business plan. For help with writing your business plan, visit www.sba.gov/writing-business-plan.

Your business credit report gives lenders information about your credit worthiness.

Be prepared to submit your business and personal tax returns for the past three years.

Prepare historical financial statements, including your balance sheet, income statement, cash flow statement and bank statements. You may also be asked to submit projected financial statements.

Be able to demonstrate your business' current financial position with accounts receivable and accounts payable information.

You may need to put up collateral, especially if you cannot provide strong financial statements.

Gather important legal documents, including your business license, articles of incorporation, third party contracts, franchise agreements and commercial leases.

7. Consider online lending. Online lending services include Kabbage and OnDeck. These loans are for businesses who want small, short-term loans. Businesses turn to these lenders to handle short-term cash flow shortfalls. The application process is quick, and most applicants can complete the application in an hour. If approved, you get the money within days.

Be aware that you will pay for the convenience of the fast processing time. These loans are expensive. A typical loan from an online source costs about the same as taking a cash advance from your credit card. The average interest rate on one of these loans can be as much as twice that of a traditional bank loan.



Method 2 Applying for Grants.

1. Compare grants with debt financing. Like a loan, a grant is typically a one-time infusion of cash. Unlike a loan, however, you do not have to pay back the money. You can think of a grant as free money. But it can be trickier to qualify for a grant than for a loan. Typically, grants are awarded to businesses that meet special criteria. For example, non-profits, minority- or women-owned businesses and those that perform highly-technical research and development activities often qualify for grant money.

2. Find out if you qualify for federal grant money. The federal government does not give grants for starting or growing a small business. Some businesses do receive federal grant money if they are involved in something related to a policy initiative. For example, the Small Business Administration (SBA) can sometimes make grants to non-profits for education and training. Also, federal grants sometimes fund medical research, science, education and highly-technical research and development activities.

SBA grants for non-profits are announced on grants.gov.

Businesses qualifying for specific initiative grants authorized by Congress will be notified.

U.S. government's Small Business Innovation Research (SBIR) program and its Small Business Technology Transfer (STTR) programs offer grants for high-tech research and development. You can find out about these grants at SBIR.gov.

3. Find state and local grants. State and local governments sometimes offer grants to specific kinds of businesses. For example, some states offer grants for expanding child care facilities. Other initiatives for which you may find state grants include developing energy-efficient technology and creating marketing for tourism. You usually are required to match funds if you receive one of these grants. Also, the grants are typically small, so you may have to seek other forms of financing, such as a loan.

4. Apply for grants for women- or minority-owned businesses. Most states offer grants for women- or minority-owned businesses. Also, federal agencies assist women and minorities to find funding to start or expand their businesses. Finally, private funding sources are available for women- and minority-owned businesses.

Go to the business section of your state's website to find available grants. Here you will also find information about any incentives or programs your state has available for your business.

Visit the Minority Business Development Agency (MBDA) at mbda.gov. This agency is run by the U.S. Department of Commerce, and it helps minorities and women to establish and expand their businesses. Here you can research grants and find links to state funding for your business.

Private companies that fund grants for women-owned businesses include Huggies, Chase Google, InnovateHER, Fedex, Idea Cafe, the Woman Veteran Entrepreneur Corp (WVEC), Walmart and Zion's Bank.

Private companies that offer grants for minority-owned businesses include Fedex, the National Association for the Self Employed (NASE), Miller Lite and Huggies.



Method 3 Finding Investors.

1. Compare investments with other types of financing. Investments are similar to grants in that they do not have to be paid back. However, they are different from grants in that the investor contributes to the company in exchange for shares, or partial ownership, of the company. This is called equity financing. Companies who choose to find investors are typically young companies that cannot qualify for other types of financing.

2. Find venture capital investments. Venture capital is perfect for businesses that cannot qualify for traditional financing either because of their small size, early stage of development or lack of equity capital. Venture capital funds invest cash in exchange for shares in your business and an active role in running the business. These investors target young, high-growth companies. This is typically a long-term commitment that gives young companies time to grow into profitable businesses.

Find venture capital funds through the Small Business Investment Program (SBIC). This program is administered by the SBA. It licenses private funds as SBICs and links them to businesses seeking equity financing. You can find the list of licensed funds by state at www.sba.gov/content/sbic-directory.

Each venture fund is a private company with its own application process. In general, the fund begins by reviewing your business plan. Then it does due diligence on your business to evaluate the worth of the investment. If the fund decides to invest, it will take an active role in running the business with you. As your company meets milestones, more financing may be available. Venture funds typically exit the investment after four to six years via mergers, acquisitions or Initial Public Offerings (IPOs).

3. Seek an angel investor. Angel investors are high-net-worth individuals who seek lucrative investments in young, high-growth businesses. These investors may be doctors, lawyers or former entrepreneurs. The Securities and Exchange Commission (SEC) has established specific criteria for accrediting angel investors.

According to the SEC, angel investors must have a net worth of at least $1 million and make $200,000 a year (or $300,000 a year jointly with a spouse).

Angel investors give you money in exchange for shares in your company. This exchange must be registered with the SEC.

Find angel investors through networking with your local Chamber of Commerce or Small Business Development Center. Also, a trusted lawyer or accountant may be able to link you to an angel investor.

Find angel investors online at the Angel Capital Association (ACA), AngelList and MicroVentures.

4. Ask friends and family. You may have friends or family members who are willing to invest in your business. Be very careful about making this choice. Unless they are already wealthy, sophisticated investors, they may not understand the risk involved. If your business fails, you cannot easily shut it down and walk away if friends and family are partial owners. Before accepting their money, make sure they understand how easily it can be lost.

February 09, 2020

How to Finance a Business Purchase

How to Finance a Business Purchase.

Buying an existing business can be convenient in a number of ways. You're buying into a proven business model with existing customers, marketing, and products. With this framework in place, you can also begin repaying your purchase expenses immediately with the profits earned by the business. However, financing that business purchase in the first place can be just as expensive as starting a business yourself. Consider the following methods for coming up with the capital to purchase a business and choose those that best suit your needs.





Taking Out a Loan



Investigate SBA loans. The Small Business Administration (SBA) guarantees loans to small business to help them get started and expand their operations. To get started on the road towards acquiring SBA financing, visit a local bank or financial institution that provides SBA loans. The SBA loan makes it easier for you to acquire financing, as part of the loan is repaid by the SBA if you fail to make payments. Specifically, the loan program you will be looking for is the SBA Basic 7(a) loan program, which is used for acquiring or starting new businesses. To qualify for this type of loan, you must.

Own or seek to own a small business as defined by the SBA. This information can be found on their website.

Plan to operate for profit.

Plan to operate within the United States or its possessions.

Have your own assets invested in the business.

Show a need for the loan.

Not owe the US government any money.



Meet with financial institutions. Financing is also available through local lending institutions, like banks and credit unions. However, this type of lending can be very difficult to secure, particularly if you have less-than-stellar credit or if there are not significant personal or business assets that can be used as collateral. To qualify for a traditional bank loan, you will need demonstrable management experience, strong existing cash flows, experience in the industry, and a high personal credit score. It may also be easier for you to obtain a loan if you have an existing, strong relationship with the bank providing the loan.

If you are a woman, veteran, or minority, banks may have special lending programs that you can qualify for.



Assess the collateral you can provide. Your collateral is the assets, either yours or the business's, that you can provide as insurance in case you default on your loan. For some business loans, these may need to be worth as much as 50 to 70 percent of the loan value. When providing collateral for the banks to use, you can include any of the following:

Equity in your own home.

Assets owned by the business, like accounts receivable and inventory.

A personal guarantee. This essentially means that, in the event of a default, you are personally liable to repay a certain amount of the loan value.

Most lenders, including the SBA, require a personal guarantee for a loan in addition to any collateral pledged. This is because they would prefer avoiding have to take possession of the collateral and go through the subsequent sale.



Get pre-qualified for several loans. Before finalizing the purchase of the business, you will need one or several letters of pre-qualification for loans. This means going through the loan process with each lender and getting the go-ahead from them to purchase the business. You can then show the letters to the seller and finalize the purchase, at which point you will need to actually take out one of the loans that you are pre-qualified for.

Getting pre-qualified for several loans is advantageous in case the lending requirements change between your pre-qualification and the close of the sale.

You will need to be pre-qualified for more than the purchase price of the business. You should also include about 90 days of working capital (money used to keep the business functioning, like utilities and inventory purchasing money). You can work with the current owner to assess how much is needed.



Consider alternative loan options. There are many other sources of loans available to finance the initial purchase of a business. For some people, there may be an opportunity to borrow money from friends or family. However, bear in mind that this may damage your relationship with that person if things go south. Some other options you can consider include:

Peer-to-peer (P2P) financing. Online lending markets like LendingClub.com and Prosper.com allow you to borrow small amounts (generally less than $25,000) from other people. However, rates on these sites are typically higher than what a bank or the SBA could offer you.

Microloans. Microloans are for smaller amounts that traditional business loans (usually less than $50,000) and have shorter durations (under six years). Check with the SBA or a microlending specialist to investigate your options.







Financing the Purchase With Your Own Assets.



Use your own savings. The easiest and cheapest way to finance your own business is with your own personal savings. This includes any savings accounts, CDs, investment accounts, or other liquid accounts you hold. By using the money from these accounts to finance your personal, you can avoid having to work with partners, investors, or lenders when running your business. However, it is rare that an individual has enough money in these accounts to purchase a business.



Sell any valuable assets you currently own. Another way to raise money is to sell off valuable assets that you own. Parcels of land, non-essential vehicles, and boats can all be sold to raise this type of money.



Borrow against your home equity. You can borrow against the value of your home using a second mortgage or a home equity line of credit (HELOC). However, this requires having enough equity in your home in the first place. More importantly, it also introduces the risk that, in the event of the business's default, your house may be foreclosed upon by the lender. Consider the risks and try every other options available to you before pursuing this type of financing.



Avoid purchasing the business with your retirement savings. While it is possible to roll your IRA or 401(k) savings balances into a business venture without taking a tax hit, doing so is incredibly risky. If your business fails to perform as expected, you could lose all of the money you have saved for retirement. Personal finance experts recommend against using this as a method of business financing.







Bringing On Investors or Partners.



Consider finding a partner or several of them. A partner is someone who provides some initial purchase money for the business in exchange for an ownership share. Your partner will likely want to be involved in the business in some way, so make sure to only take on a partner that you can work well with. And being personally close with someone doesn't make them a good partner; sometimes a trusted or knowledgable co-worker or acquaintance can make a better partner than a friend or family member.

In addition, make sure to draw up a legal contract that clarifies the terms of the partnership. This agreement should list how disputes are settled, how major decisions are made, and exactly how profits are divided.



Work with a silent partner. A silent partner is one that contributes capital to the business, but has no say in its operations. However, many silent partners eventually want to have a say in how the business is run. Again, to ensure that this relationship works as planned, draw up a partnership agreement that specifies the terms of your partnership in detail.



Bring on angel investors. An angel investor is a wealthy private investor who gives start-up capital to new businesses and new business owners in exchange for equity in that business. Businesses with angel investors benefits from the angel investor's industry expertise, business contacts, and financial resources. Locating angel investors, however, can be difficult. You'll have to locate a high net worth individual who shares your passion for the business you are buying and its industry. Then, you'll have to convince them of your own management skill and your ability to give them a good return on their money.

Angel Investors can be located by visiting the Angel Capital Association's website.



Engage in equity crowdfunding. Equity crowdfunding, which involves selling small stakes in your business to a large number of small investors, is a relative newcomer in the world of business financing. While equity crowdfunding has been around for years, operating through sites like SeedInvest, it has recently become tightly regulated by the Securities and Exchange Commission (SEC). Equity crowdfunding can be an effective way to raise money, but only with the proper guidance, as following SEC guidelines can be complicated.







Getting Seller Financing



Consider the benefits and drawbacks of seller financing. Seller financing, also called owner financing, is a purchase arrangement in which you repay the sale price of the business directly to its previous owner over several years. For the buyer, this provides some flexibility in repaying the loan, such as negotiating a longer repayment period, a temporary reprieve from payments, or reducing the price in exchange for letting the owner keep some equity in the business. However, this type of arrangement is typically more expensive, with the owner charging a higher interest rate than the bank would charge.

Ideally, the buyer should negotiate an arrangement where all or a portion of the loan financed by the seller may be contingent upon the profits reached and payable over a limited term. This protects the buyer in case profits are not as high as expected.

Obtaining seller financing may give you more power in negotiating down the price of the business.

Doing so also gives the seller reason to help you out more in running and managing the business.[



Ask the seller if they would consider seller financing. Start by asking the seller directly if they would consider seller financing. It may help if you explain to them that this will result in their getting more money over time, as they get to keep the interest on your loan (rather than the bank keeping it). If they agree, you can begin negotiating a contract.

If possible, avoid securing the seller with assets purchased. This gives you a cushion if additional financing is needed to get the business is running smoothly.



Negotiate a contract. Work with the seller to form the terms of sale. Start by offering to make a down payment with what you can gather on your own, say 10 to 20 percent of the sale price. Try to offer as large of a down payment as you can afford; this will only help you and save you money in the long run. Then discuss a repayment period and interest rate. Try to negotiate a longer repayment period and lower interest rate to make sure that you can afford the payments.

You may be able to agree on a large, balloon payment in a number of years. This will reduce your monthly payments. Then, you can get a bank loan or use your savings to cover the balloon payment.

Alternately, where a C corporation is involved in the purchase, issuing preferred stock may be a better option than debt for the buyer when repaying the balloon payment.



Have a lawyer review the contract. Ideally, you should have an attorney that specializes in business contracts draw up the contract. However, you can also have one review the contract to ensure that your interests are represented and that there are no surprises waiting for you in the wording of the contract. You may also want to have an accountant review the financials of the deal to make sure everything checks out.

The lawyer, and possibly an accountant, should confirm the validity of the financial statements, specifically the identity, value and location of assets and liabilities.



Finalize the deal. Once you've been assured that the contract is right for both you and the seller, close the deal and take control of the business. With seller financing, you'll likely be able to convince the previous owner to help you out with getting started as the manager of your new business.

November 14, 2019

how to finance a business purchase

How to Finance a Business Purchase.

Buying an existing business can be convenient in a number of ways. You're buying into a proven business model with existing customers, marketing, and products. With this framework in place, you can also begin repaying your purchase expenses immediately with the profits earned by the business. However, financing that business purchase in the first place can be just as expensive as starting a business yourself. Consider the following methods for coming up with the capital to purchase a business and choose those that best suit your needs.





Taking Out a Loan



Investigate SBA loans. The Small Business Administration (SBA) guarantees loans to small business to help them get started and expand their operations. To get started on the road towards acquiring SBA financing, visit a local bank or financial institution that provides SBA loans. The SBA loan makes it easier for you to acquire financing, as part of the loan is repaid by the SBA if you fail to make payments. Specifically, the loan program you will be looking for is the SBA Basic 7(a) loan program, which is used for acquiring or starting new businesses. To qualify for this type of loan, you must.

Own or seek to own a small business as defined by the SBA. This information can be found on their website.

Plan to operate for profit.

Plan to operate within the United States or its possessions.

Have your own assets invested in the business.

Show a need for the loan.

Not owe the US government any money.



Meet with financial institutions. Financing is also available through local lending institutions, like banks and credit unions. However, this type of lending can be very difficult to secure, particularly if you have less-than-stellar credit or if there are not significant personal or business assets that can be used as collateral. To qualify for a traditional bank loan, you will need demonstrable management experience, strong existing cash flows, experience in the industry, and a high personal credit score. It may also be easier for you to obtain a loan if you have an existing, strong relationship with the bank providing the loan.

If you are a woman, veteran, or minority, banks may have special lending programs that you can qualify for.



Assess the collateral you can provide. Your collateral is the assets, either yours or the business's, that you can provide as insurance in case you default on your loan. For some business loans, these may need to be worth as much as 50 to 70 percent of the loan value. When providing collateral for the banks to use, you can include any of the following:

Equity in your own home.

Assets owned by the business, like accounts receivable and inventory.

A personal guarantee. This essentially means that, in the event of a default, you are personally liable to repay a certain amount of the loan value.

Most lenders, including the SBA, require a personal guarantee for a loan in addition to any collateral pledged. This is because they would prefer avoiding have to take possession of the collateral and go through the subsequent sale.



Get pre-qualified for several loans. Before finalizing the purchase of the business, you will need one or several letters of pre-qualification for loans. This means going through the loan process with each lender and getting the go-ahead from them to purchase the business. You can then show the letters to the seller and finalize the purchase, at which point you will need to actually take out one of the loans that you are pre-qualified for.

Getting pre-qualified for several loans is advantageous in case the lending requirements change between your pre-qualification and the close of the sale.

You will need to be pre-qualified for more than the purchase price of the business. You should also include about 90 days of working capital (money used to keep the business functioning, like utilities and inventory purchasing money). You can work with the current owner to assess how much is needed.



Consider alternative loan options. There are many other sources of loans available to finance the initial purchase of a business. For some people, there may be an opportunity to borrow money from friends or family. However, bear in mind that this may damage your relationship with that person if things go south. Some other options you can consider include:

Peer-to-peer (P2P) financing. Online lending markets like LendingClub.com and Prosper.com allow you to borrow small amounts (generally less than $25,000) from other people. However, rates on these sites are typically higher than what a bank or the SBA could offer you.

Microloans. Microloans are for smaller amounts that traditional business loans (usually less than $50,000) and have shorter durations (under six years). Check with the SBA or a microlending specialist to investigate your options.







Financing the Purchase With Your Own Assets.



Use your own savings. The easiest and cheapest way to finance your own business is with your own personal savings. This includes any savings accounts, CDs, investment accounts, or other liquid accounts you hold. By using the money from these accounts to finance your personal, you can avoid having to work with partners, investors, or lenders when running your business. However, it is rare that an individual has enough money in these accounts to purchase a business.



Sell any valuable assets you currently own. Another way to raise money is to sell off valuable assets that you own. Parcels of land, non-essential vehicles, and boats can all be sold to raise this type of money.



Borrow against your home equity. You can borrow against the value of your home using a second mortgage or a home equity line of credit (HELOC). However, this requires having enough equity in your home in the first place. More importantly, it also introduces the risk that, in the event of the business's default, your house may be foreclosed upon by the lender. Consider the risks and try every other options available to you before pursuing this type of financing.



Avoid purchasing the business with your retirement savings. While it is possible to roll your IRA or 401(k) savings balances into a business venture without taking a tax hit, doing so is incredibly risky. If your business fails to perform as expected, you could lose all of the money you have saved for retirement. Personal finance experts recommend against using this as a method of business financing.







Bringing On Investors or Partners.



Consider finding a partner or several of them. A partner is someone who provides some initial purchase money for the business in exchange for an ownership share. Your partner will likely want to be involved in the business in some way, so make sure to only take on a partner that you can work well with. And being personally close with someone doesn't make them a good partner; sometimes a trusted or knowledgable co-worker or acquaintance can make a better partner than a friend or family member.

In addition, make sure to draw up a legal contract that clarifies the terms of the partnership. This agreement should list how disputes are settled, how major decisions are made, and exactly how profits are divided.



Work with a silent partner. A silent partner is one that contributes capital to the business, but has no say in its operations. However, many silent partners eventually want to have a say in how the business is run. Again, to ensure that this relationship works as planned, draw up a partnership agreement that specifies the terms of your partnership in detail.



Bring on angel investors. An angel investor is a wealthy private investor who gives start-up capital to new businesses and new business owners in exchange for equity in that business. Businesses with angel investors benefits from the angel investor's industry expertise, business contacts, and financial resources. Locating angel investors, however, can be difficult. You'll have to locate a high net worth individual who shares your passion for the business you are buying and its industry. Then, you'll have to convince them of your own management skill and your ability to give them a good return on their money.

Angel Investors can be located by visiting the Angel Capital Association's website.



Engage in equity crowdfunding. Equity crowdfunding, which involves selling small stakes in your business to a large number of small investors, is a relative newcomer in the world of business financing. While equity crowdfunding has been around for years, operating through sites like SeedInvest, it has recently become tightly regulated by the Securities and Exchange Commission (SEC). Equity crowdfunding can be an effective way to raise money, but only with the proper guidance, as following SEC guidelines can be complicated.







Getting Seller Financing



Consider the benefits and drawbacks of seller financing. Seller financing, also called owner financing, is a purchase arrangement in which you repay the sale price of the business directly to its previous owner over several years. For the buyer, this provides some flexibility in repaying the loan, such as negotiating a longer repayment period, a temporary reprieve from payments, or reducing the price in exchange for letting the owner keep some equity in the business. However, this type of arrangement is typically more expensive, with the owner charging a higher interest rate than the bank would charge.

Ideally, the buyer should negotiate an arrangement where all or a portion of the loan financed by the seller may be contingent upon the profits reached and payable over a limited term. This protects the buyer in case profits are not as high as expected.

Obtaining seller financing may give you more power in negotiating down the price of the business.

Doing so also gives the seller reason to help you out more in running and managing the business.[



Ask the seller if they would consider seller financing. Start by asking the seller directly if they would consider seller financing. It may help if you explain to them that this will result in their getting more money over time, as they get to keep the interest on your loan (rather than the bank keeping it). If they agree, you can begin negotiating a contract.

If possible, avoid securing the seller with assets purchased. This gives you a cushion if additional financing is needed to get the business is running smoothly.



Negotiate a contract. Work with the seller to form the terms of sale. Start by offering to make a down payment with what you can gather on your own, say 10 to 20 percent of the sale price. Try to offer as large of a down payment as you can afford; this will only help you and save you money in the long run. Then discuss a repayment period and interest rate. Try to negotiate a longer repayment period and lower interest rate to make sure that you can afford the payments.

You may be able to agree on a large, balloon payment in a number of years. This will reduce your monthly payments. Then, you can get a bank loan or use your savings to cover the balloon payment.

Alternately, where a C corporation is involved in the purchase, issuing preferred stock may be a better option than debt for the buyer when repaying the balloon payment.



Have a lawyer review the contract. Ideally, you should have an attorney that specializes in business contracts draw up the contract. However, you can also have one review the contract to ensure that your interests are represented and that there are no surprises waiting for you in the wording of the contract. You may also want to have an accountant review the financials of the deal to make sure everything checks out.

The lawyer, and possibly an accountant, should confirm the validity of the financial statements, specifically the identity, value and location of assets and liabilities.



Finalize the deal. Once you've been assured that the contract is right for both you and the seller, close the deal and take control of the business. With seller financing, you'll likely be able to convince the previous owner to help you out with getting started as the manager of your new business.

November 13, 2019

how to finance a business purchase

How to Finance a Business Purchase.

Buying an existing business can be convenient in a number of ways. You're buying into a proven business model with existing customers, marketing, and products. With this framework in place, you can also begin repaying your purchase expenses immediately with the profits earned by the business. However, financing that business purchase in the first place can be just as expensive as starting a business yourself. Consider the following methods for coming up with the capital to purchase a business and choose those that best suit your needs.



Method 1 Taking Out a Loan.



1. Investigate SBA loans. The Small Business Administration (SBA) guarantees loans to small business to help them get started and expand their operations. To get started on the road towards acquiring SBA financing, visit a local bank or financial institution that provides SBA loans. The SBA loan makes it easier for you to acquire financing, as part of the loan is repaid by the SBA if you fail to make payments. Specifically, the loan program you will be looking for is the SBA Basic 7(a) loan program, which is used for acquiring or starting new businesses. To qualify for this type of loan, you must.

Own or seek to own a small business as defined by the SBA. This information can be found on their website.

Plan to operate for profit.

Plan to operate within the United States or its possessions.

Have your own assets invested in the business.

Show a need for the loan.

Not owe the US government any money.



2. Meet with financial institutions. Financing is also available through local lending institutions, like banks and credit unions. However, this type of lending can be very difficult to secure, particularly if you have less-than-stellar credit or if there are not significant personal or business assets that can be used as collateral. To qualify for a traditional bank loan, you will need demonstrable management experience, strong existing cash flows, experience in the industry, and a high personal credit score. It may also be easier for you to obtain a loan if you have an existing, strong relationship with the bank providing the loan.

If you are a woman, veteran, or minority, banks may have special lending programs that you can qualify for.



3. Assess the collateral you can provide. Your collateral is the assets, either yours or the business's, that you can provide as insurance in case you default on your loan. For some business loans, these may need to be worth as much as 50 to 70 percent of the loan value. When providing collateral for the banks to use, you can include any of the following:

Equity in your own home.

Assets owned by the business, like accounts receivable and inventory.

A personal guarantee. This essentially means that, in the event of a default, you are personally liable to repay a certain amount of the loan value.

Most lenders, including the SBA, require a personal guarantee for a loan in addition to any collateral pledged. This is because they would prefer avoiding have to take possession of the collateral and go through the subsequent sale.



4. Get pre-qualified for several loans. Before finalizing the purchase of the business, you will need one or several letters of pre-qualification for loans. This means going through the loan process with each lender and getting the go-ahead from them to purchase the business. You can then show the letters to the seller and finalize the purchase, at which point you will need to actually take out one of the loans that you are pre-qualified for.

Getting pre-qualified for several loans is advantageous in case the lending requirements change between your pre-qualification and the close of the sale.

You will need to be pre-qualified for more than the purchase price of the business. You should also include about 90 days of working capital (money used to keep the business functioning, like utilities and inventory purchasing money). You can work with the current owner to assess how much is needed.



5. Consider alternative loan options. There are many other sources of loans available to finance the initial purchase of a business. For some people, there may be an opportunity to borrow money from friends or family. However, bear in mind that this may damage your relationship with that person if things go south. Some other options you can consider include:

Peer-to-peer (P2P) financing. Online lending markets like LendingClub.com and Prosper.com allow you to borrow small amounts (generally less than $25,000) from other people. However, rates on these sites are typically higher than what a bank or the SBA could offer you.

Microloans. Microloans are for smaller amounts that traditional business loans (usually less than $50,000) and have shorter durations (under six years). Check with the SBA or a microlending specialist to investigate your options.



Method 2 Financing the Purchase With Your Own Assets.



1. Use your own savings. The easiest and cheapest way to finance your own business is with your own personal savings. This includes any savings accounts, CDs, investment accounts, or other liquid accounts you hold. By using the money from these accounts to finance your personal, you can avoid having to work with partners, investors, or lenders when running your business. However, it is rare that an individual has enough money in these accounts to purchase a business.



2. Sell any valuable assets you currently own. Another way to raise money is to sell off valuable assets that you own. Parcels of land, non-essential vehicles, and boats can all be sold to raise this type of money.



3. Borrow against your home equity. You can borrow against the value of your home using a second mortgage or a home equity line of credit (HELOC). However, this requires having enough equity in your home in the first place. More importantly, it also introduces the risk that, in the event of the business's default, your house may be foreclosed upon by the lender. Consider the risks and try every other options available to you before pursuing this type of financing.



4. Avoid purchasing the business with your retirement savings. While it is possible to roll your IRA or 401(k) savings balances into a business venture without taking a tax hit, doing so is incredibly risky. If your business fails to perform as expected, you could lose all of the money you have saved for retirement. Personal finance experts recommend against using this as a method of business financing.



Method 3 Bringing On Investors or Partners.



1. Consider finding a partner or several of them. A partner is someone who provides some initial purchase money for the business in exchange for an ownership share. Your partner will likely want to be involved in the business in some way, so make sure to only take on a partner that you can work well with. And being personally close with someone doesn't make them a good partner; sometimes a trusted or knowledgable co-worker or acquaintance can make a better partner than a friend or family member.

In addition, make sure to draw up a legal contract that clarifies the terms of the partnership. This agreement should list how disputes are settled, how major decisions are made, and exactly how profits are divided.



2. Work with a silent partner. A silent partner is one that contributes capital to the business, but has no say in its operations. However, many silent partners eventually want to have a say in how the business is run. Again, to ensure that this relationship works as planned, draw up a partnership agreement that specifies the terms of your partnership in detail.



3. Bring on angel investors. An angel investor is a wealthy private investor who gives start-up capital to new businesses and new business owners in exchange for equity in that business. Businesses with angel investors benefits from the angel investor's industry expertise, business contacts, and financial resources. Locating angel investors, however, can be difficult. You'll have to locate a high net worth individual who shares your passion for the business you are buying and its industry. Then, you'll have to convince them of your own management skill and your ability to give them a good return on their money.

Angel Investors can be located by visiting the Angel Capital Association's website.



4. Engage in equity crowdfunding. Equity crowdfunding, which involves selling small stakes in your business to a large number of small investors, is a relative newcomer in the world of business financing. While equity crowdfunding has been around for years, operating through sites like SeedInvest, it has recently become tightly regulated by the Securities and Exchange Commission (SEC). Equity crowdfunding can be an effective way to raise money, but only with the proper guidance, as following SEC guidelines can be complicated.



Method 4 Getting Seller Financing.



1. Consider the benefits and drawbacks of seller financing. Seller financing, also called owner financing, is a purchase arrangement in which you repay the sale price of the business directly to its previous owner over several years. For the buyer, this provides some flexibility in repaying the loan, such as negotiating a longer repayment period, a temporary reprieve from payments, or reducing the price in exchange for letting the owner keep some equity in the business. However, this type of arrangement is typically more expensive, with the owner charging a higher interest rate than the bank would charge.

Ideally, the buyer should negotiate an arrangement where all or a portion of the loan financed by the seller may be contingent upon the profits reached and payable over a limited term. This protects the buyer in case profits are not as high as expected.

Obtaining seller financing may give you more power in negotiating down the price of the business.

Doing so also gives the seller reason to help you out more in running and managing the business.



2. Ask the seller if they would consider seller financing. Start by asking the seller directly if they would consider seller financing. It may help if you explain to them that this will result in their getting more money over time, as they get to keep the interest on your loan (rather than the bank keeping it). If they agree, you can begin negotiating a contract.

If possible, avoid securing the seller with assets purchased. This gives you a cushion if additional financing is needed to get the business is running smoothly.



3. Negotiate a contract. Work with the seller to form the terms of sale. Start by offering to make a down payment with what you can gather on your own, say 10 to 20 percent of the sale price. Try to offer as large of a down payment as you can afford; this will only help you and save you money in the long run. Then discuss a repayment period and interest rate. Try to negotiate a longer repayment period and lower interest rate to make sure that you can afford the payments.

You may be able to agree on a large, balloon payment in a number of years. This will reduce your monthly payments. Then, you can get a bank loan or use your savings to cover the balloon payment.

Alternately, where a C corporation is involved in the purchase, issuing preferred stock may be a better option than debt for the buyer when repaying the balloon payment.



4. Have a lawyer review the contract. Ideally, you should have an attorney that specializes in business contracts draw up the contract. However, you can also have one review the contract to ensure that your interests are represented and that there are no surprises waiting for you in the wording of the contract. You may also want to have an accountant review the financials of the deal to make sure everything checks out.

The lawyer, and possibly an accountant, should confirm the validity of the financial statements, specifically the identity, value and location of assets and liabilities.



5. Finalize the deal. Once you've been assured that the contract is right for both you and the seller, close the deal and take control of the business. With seller financing, you'll likely be able to convince the previous owner to help you out with getting started as the manager of your new business.

November 22, 2019

How to Find Investors for a Small Business

How to Find Investors for a Small Business.

If you want to start a small business or expand an existing one, then you’ll need to find money. One option is to bring on investors. There are many potential investors out there. However, you need to identify which ones will invest in your business and then put together a compelling presentation. When you meet with investors, remember to answer questions with confidence.

Part  1 Identifying Potential Investors.
1. Ask small business groups. You might not know where to begin. It’s probably best to start close to home. Meet with other small business owners or stop into your local Chamber of Commerce. Ask if they know of investors for your business.
2. Contact the Small Business Administration (SBA). In the U.S., the Small Business Investment Company (SBIC) program helps small businesses find investors. Over $21 billion of capital has been channeled through this program. Each SBIC is privately owned. However, they are licensed and regulated by the SBA.
You can find the SBIC directory here: https://www.sba.gov/sbic/financing-your-small-business/directory-sbic-licensees.
For purposes of the SBIC program, a small business generally has a net worth of less than $18 million and net income of $6 million or less. Furthermore, some business are prohibited from participating in the program.
3. Find a local incubator or accelerator. These organizations help start-ups turn their ideas into a real business, and they provide funding as well. You can find an incubator or accelerator near you by using the National Business Incubation Association’s directory listing.
Generally, incubators help start-ups or new businesses, while accelerators help already-established businesses grow faster.
Incubators might not provide investments directly. However, they can help connect you to potential investors.
4. Look at online crowdfunding. You can reach investors worldwide by using an online crowdfunding site, such as Equity.net. These websites give you access to hundreds of investors who can help you finalize your business plan and grow your business.
5. Remember family and friends. People who know you might invest in your business, especially since they can see your drive and determination. Remember to approach them as you would any other investor.
Friends and family will want some return on their investment, just like other investors. However, you might be more flexible in what you can offer. For example, instead of making them part-owners, you might want to provide them with free goods or services in return.
You also should think about asking people you know for a loan instead of for an investment. With a loan, you don’t have to give up any ownership in your business. Also, if your business fails, you can wipe out a loan in bankruptcy.
6. Hire a business capital broker. These brokers have networks of potential investors that they can contact. You can find a business capital broker online or by talking to other businesses that might have used a broker.
7. Consider if venture capital is right for you. Venture capital is a term used to describe a variety of investors, including private equity firms, venture capital firms, and angel investors. Although different, they share similarities.
They take big risks for potential big financial rewards. Accordingly, venture capital usually invests in industries with large growth potential, such as technology or biomedicine. Very few businesses qualify for venture capital financing.
They are actively involved in your business. For example, they will probably demand a seat on your board in exchange for investment capital. However, they often are experienced in your industry and can help you grow.
They have a longer investment horizon than other forms of financing.
8. Find venture capital investors. Look online at websites such as Angel Capital Association, Angel Investment Network, and Funded.com. Investors use these sites to find businesses to invest in.
The Angel Capital Association has a directory listing accredited investors. You can search by region or state. Links are provided so that you can visit the investor’s website to learn more about them.

Part 2 Putting Together a Presentation.
1. Run the numbers. You need to know how much money you’re after. If you need a small amount, you might only seek out one investor. However, if you need a lot of capital, then you’ll need to know that as well. Calculate how much money you need for your small business.
Also consider how much of your equity you are willing to give up in return. Investors don’t give loans. Instead, they take a share of ownership in exchange for money. You’ll need to come up with something reasonable.
For example, if your business is worth $100,000 and you want $25,000, then you’ll need to give up around 25% of the business’ equity.
2. Update your business plan. Your investors will want to see your business plan, which you should have already created if you are an existing business. The plan will identify your market, competitors, and include financial projections for five years.
Update the financial information so that it is current.
You should also bulk up the executive summary to your plan. Investors often will skip other parts but focus on the summary, so spend extra time on it.
Make the business plan colorful and include graphics so that the information is easy to digest.
3. Research the investor. You need to know whether a potential investor will be interested in your business. Many investors focus on only certain industries, so you’ll save yourself time if you figure out ahead of time their focus.
Look online to check what businesses they have invested in.
Look at their LinkedIn profile to see if you know people in common. If so, ask whether the investor might be interested in your business.
4. Ask for a meeting. There’s no one way to reach out to an investor. If someone recommended the investor to you, then mention the recommender’s name in your email or when you call. Alternately, you can send your email to the recommender, and they can then forward it on to the investor.
In the body of your email, clearly communicate what you do.
Mention the age of your business. Are you a start-up? Have you been in business for ten years?
Identify any other investors you have worked with. For example, an investor might have given you start-up funds five years ago.
Provide dates when you are willing to meet. Try to be as flexible as possible.
Proofread your email so that it looks professional.
Attach something to show the investor your business. For example, you might create a short video that shows your products or services.
5. Know your story. Investors aren’t only investing in a business. They are also investing in a person—you. Accordingly, they’ll want to know stuff about you. You need to be able to explain the following.
What about your background has led you to this point?
How have you benefited from your previous business experience. Be prepared to point to specific achievements.
6. Prepare for common questions. You can’t anticipate in advance everything a potential investor will ask you. However, there are some common questions you should think through.
What has been the biggest mistake you’ve made in your business?
How are your competitors outperforming you? Why?
Is anything working against your business, e.g., new regulations, demographic changes, etc.?
Why are you seeking funding?
What are your long-term growth plans? How do you intend to get there?
7. Get help from a Small Business Development Center. Your nearest SBDC can help you pull together a business plan, find potential investors, and prepare for meeting with investors. Contact the nearest SBDC and schedule an appointment.
You can find the nearest office here: https://www.sba.gov/tools/local-assistance/sbdc.

Part 3 Meeting with Potential Investors.
1. Make a memorable presentation. You’ll probably make a presentation to investors, which can take many forms. For example, you might make a PowerPoint presentation or create a booklet for the investor to flip through. With other investors, you’ll simply sit and talk. Whatever form your presentation takes, it’s important not to simply repeat the contents of your business plan.
Yes, the investor wants to understand your financials, which is why you have a business plan handy for them to take and read. However, it doesn’t hurt to get creative.
Show the investor your product or service. If you are expanding a pastry business, have an assortment of pastries with you. If you provide a service, then you can create a short video that shows your business in action. You need to give the investor a concrete idea of what your business does.
Remember that pictures are more memorable than words. If you create a PowerPoint, don’t fill it up with text.
2. Be brief. Your presentation shouldn’t take more than 20 minutes. If you use a PowerPoint, then it shouldn’t have more than 15 slides. Practice your presentation until you it is the right length.
3. Ask for advice at the first meeting. Don’t dive right in and ask for money. A potential investor needs time to mull over your business idea before they can decide whether they want to invest. Accordingly, you should spend the first meeting tapping the investor’s business knowledge.
However, you can subtly work money into the discussion. For example, you can say in an offhand manner, “I’ve been thinking I’d need $130,000 to open a new store in that location, but I’d like to hear from you if there are hidden costs you’ve found in your experience…”
4. Be honest. An investor won’t cut a check until they perform due diligence. They’ll want to take a closer look at your business financials, and they will uncover any misrepresentation you make. Always be honest in your business plan and in your conversations with potential investors.
Admit when you don’t know an answer. An investor will appreciate your honesty.
If you lie to one investor, then they will talk to others in their community. You’ll get a bad name and not be able to find any investors.
5. Project confidence. Potential investors want to see that you have faith in your business. Avoid being arrogant, which shows that you are insecure. Instead, project quiet confidence in the following ways:
Listen. Insecure people chatter all the time and laugh awkwardly to fill up silence. Be prepared to listen.
Stand up straight. Put your shoulders back when you sit and stand.
Make eye contact when talking and listening to someone.
Avoid fidgeting.
6. Remember to ask the investor questions. Any investor will take an ownership stake in your business. Accordingly, you’ll need to vet them as well. Ask the following questions before agreeing to work with someone.
What other projects are they investing in? Check whether or not they are similar to your business, or whether they are in different industries.
When was their last investment? If the investor hasn’t been investing in a while, they may not be serious.
How do they plan to increase your company’s value?
What factors will you consider before deciding to invest?
How active do they want to be in the business? Does the investor want a seat on the board, handle day-to-day operations, etc.?
7. Follow up with the investor. After a first meeting, thank the investor by sending them an email. It’s unlikely that they’ll agree to invest after only one meeting, so you want to keep the doors of communication open. A short, professional "thank you" email can do the trick.
You can also keep the investor updated on the progress of your business. For example, if you were rolling out a new product, let them know how it is going.
8. Stay professional if rejected. It’s hard to tell why people choose not to invest in businesses. You might not have been a right fit, or they might have already chosen to invest in a similar business. Regardless of the reason, you can control how you respond. Stay professional and thank them for their time.
Remember that you might run into the investor later down the road, when they are more willing to invest in you. There’s no reason to burn bridges right now.
9. Keep trying. Avoid being discouraged if you don’t get many offers, or if every presentation you give results in a rejection. You probably haven’t found the right investor yet. Keep searching, because the perfect investor may still be out there.

FAQ.

Question : How can I attract customers for my trading business?
Answer : Advertisement is key. Go to your local paper and ask them if they would run an article on your business, or just buy advertising within the paper. You can also start a social media group and add friends and family to help spread the word. Creating a website, or having one created for you, is also ideal. this will show possible investors that you are dedicated to this and will also give them a chance to see what would be in it for them.
Question : What are basic rules to follow when speaking to an investor?
Answer : You must possess and demonstrate the following characteristics: Professionalism, manners, wisdom, soundness, honesty, commitment, passion and determination.
Question : I'm looking for an investor for my restaurant. Where can I find more information?
Answer : Seek out colleges and universities that have master chef programs. You will find that the same people who are donating money to these schools come from within social circles that are also interested in helping to establish finer restaurateurs.
Question : How can I find an investor for an international school I want to establish in Ghana?
Answer : For an international school, you could try fundraising websites and create a social media group to help spread awareness. People will donate money to worthy causes, if they are aware of them.
Question : How do I find someone to invest in a business I want to purchase?
Answer : It depends on the type of business you are purchasing. Look for trade associations local to you area and find out if they have regular meetings you might attend.
Question : How can I find a business partner?
Answer : You can put the word out on social media or by handing out flyers at pertinent businesses. Offer perks for your business partners.
Question : How can I find a foreign investor to distribute products in Myanmar?
Answer : I would start with contacting the Myanmar Embassy in Washington, D.C. They should be able to assist with your questions concerning international trade, as well as help to put you in contact with the people who do the licensing for international trade and distribution of goods and services.

April 07, 2020