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How to raise millions for your business

Discover the funding tips and secrets of success from experts who’ve raised millions in capital.

Assess your financing needs and options

The stage of your business and its type will have a lot to do with what kind of financing may be available to you – and how much.

For example, entrepreneurs in professional services can raise $200,000 through a mini prospectus and seeking out a group of smaller individual investors to fund expansion or opening an office.

Meanwhile, a manufacturing company in a similar position can get a bank loan using equipment and purchased location as collateral. But, a budding technology company, which will often have no collateral and high investment need, probably won’t qualify for a loan. It may turn to a multi-million dollar investment from venture capital instead.

Each funding option comes with its own expectations, especially equity financing. So be aware.

For example, Small Business Investment Companies (SBICs) can provide the equity needed to get a traditional bank loan or needed capital. They are usually looking to get their money out of your company in 3 to 5 years, explains Wayne Currie, Chairman and CEO of Incentive Capital Management Inc. and Solid Rock Development Corporation. So, they often will place a person on your board of directors to help you grow the company.

When more financing is required, smaller investors often have relationships that can lead you to venture capital. A venture capital investor typically has about 20 companies in a portfolio and is looking for at least one of these companies to make it big. They may take a heavy hand in your company, placing one or more people on your board and suggesting mergers and other deals.

“Their usual exit is to take you public,” explains Wayne. “That’s not necessarily a good thing for you for your family or your business.”

Raising significant money for a business usually means pulling together funds from a variety of sources, including bank debt, venture capital or angel funding and receivables financing.

How ever you get funded, it will take more time than you to think to grow your business, says Wayne. To be prepared, consider leveraging existing funding for even more capital from another source.

 

Prepare for the Ask

Different banks and investors are interested in different types of deals and businesses. It’s critical to research the right source of funding, says Charles Green who raised $8 million to found Sunrise Bank of Atlanta, where he is now President.

“A lot of people waste their time coming into my office,” says Charles. “We do what we do, and Bank of America does what they do, and it’s two different things.”

The more money you are asking for, the more important it is to have a sophisticated business plan, says Wayne. That plan should reflect your understanding of your business and your market, including management, distribution plan, competition and financial forecasting.

Investors are also looking for experienced mangers. If you lack experience in your field or position, hire staff or find an advisor who has. And if you don’t have your entire management team assembled, at least know where to find them because once you are funded you can’t take 12 months for a management search. You have to meet your financial projections.

Charles suggests that entrepreneurs have one or two trusted business advisors, look over their proposals. “Someone who already knows them and has a sense of their capabilities and the viability of their process and their talent, because those people can speak honestly and frankly without it feeling like [you] are being rejected.”

All that effort put into developing a strong business plan and building a good management team will greatly increase your chances for funding.

When Charles is funding proposals, he looks for “someone who can describe their opportunity in concise terms without a lot of fluff. Most experienced lenders have seen plenty of packages. It’s easy to spot someone who really doesn’t know what they are talking about but are just using lots of flowery language to describe some pipe dream.”

Final advice

“Part of doing anything is risk management,” says Wayne. “You could gamble your whole biscuit on too big a deal and be out of business. And so you want to be real careful not to over commit yourself because that could ruin everything.”

You’ll need lots of persistence, especially in the beginning, when the value of the business is not established and when you’ll be hearing lots of “no”s. “You have to stick with it until your deal resonates with someone willing to back you,” says Charles.

 


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