There are many different ways to raise capital for your business through equity and/or debt financing. If you need assistance or a quality referral, such as bankers, investment bankers, VC’s, private equity, angel investors, asset-based lenders, etc., let us know. Sandstrum Law is about making connections to assist business owners to continue to move their businesses forward.
General, there are two types of business financing, equity and debt financing. The item numbers listed below in red font are more typical vehicles that small business owners use when they desire to raise capital:
1. The Promissory Note. Sandstrum Law has assisted in raising 1 million and above in capital for clients using the Promissory Note method. A promissory note documents the loan, including repayment terms and agreed upon interest rate. A promissory note can be considered as a security by the SEC, and as such it is quite possible that a private placement memorandum (PPM) may be required to outline the risk of the lender’s investment into your business. A business attorney would prepare the PPM and Promissory Note.
2. Friends & Family. It could be a gift, a loan (promissory note) or a controlling or non-controlling equity investment in the business. Each have pluses and minuses, and each should be recorded in writing, in many cases a legal document, and discussed with your attorney or business advisor.
3. The Private Bank Loan. If you need a referral to a reputable banker, Sandstrum Law can assist. Let us know.
4. The Small Business Administration (SBA) Loan. If you need a referral to a reputable bankers who work with the SBA, Sandstrum Law can assist. Let us know.
Also, see SBA website.
5. Microloans. Loans can reach to up to $50,000, with an average microloan of about $13,000. How to get it: Microloans are available through nonprofit community-based organizations that serve as intermediaries. There are about 200 across the United States. See http://www.sba.gov/sites/default/files/PIMS_Microlender%20Intermediary%20List_140422.pdf
6. Asset-Based Loans. (lender loans money against business assets), if you need a referral to a reputable Asset Based Lender, Sandstrum Law can assist. Let us know.
7. Private Loan Guarantees. This occurs were typically a wealthy investor guarantees a bank loan for a return on his guarantee.
8. Borrowing against Your 401k. If you have the ability to do so, ask your financial advisor, and if you do not have one, Sandstrum Law can refer you to financial advisors/wealth managers. Essentially, the business owner borrowers (takes a loan) against his/her 401k at the applicable interest rate. The upside is that you are both the lender and borrower – so you are paying yourself back over a period of time.
9. Royalty Financing (investors lend money for a guaranteed percentage of revenues for whatever the business is selling).
10. Equity: Angel Investing. It may be difficult to obtain, but Sandstrum Law can provide referrals sources that may be of assistance.
11. Equity: Venture Capital & Private Equity. It may be difficult to obtain, but Sandstrum Law can provide referrals sources that may be of assistance.
12. Home Equity Financing. Sandstrum Law can provide referrals to good mortgage brokers/banks.
13. Crowdfunding is about persuading individuals to each give you a small donation — $10, $50, $100, maybe more. Once you get thousands of donors, you have some serious cash on hand. There are people who specialize in this area, if you need a referral, please let me know.
14. Credit Cards.
15. Government Venture Capital. The SBA guarantees not only bank loans but also it backs venture capital.
16. Business Incubators. Business incubators are organizations geared toward speeding up the growth and success of startup and early stage companies. They’re often a good path to capital from angel investors, state governments, economic-development coalitions and other investors.
The National Business Incubation Association has more than 1,400 members in the United States — and a total 1,900 members in 60 nations.
17. Direct Public Offerings. This method can be very costly, but crowdfunding can make it more attractive.
18. Reverse Mergers. If an IPO is not desirable, a reverse merger may be a good fit.
19. Hard Money Loan. A hard money loan is a specific type of asset-based loan financing through which a borrower receives funds secured by the value of a parcel of real estate.
Also, seek out local entrepreneurship advice programs. One place to start looking is the SBA’s website, you can search for local Small Business Development Centers, SCORE chapters and other resources.