How to Get the Financing for Your New Small Business

by Fullen, Sharon L.

• ISBN13: 9780910627559
• ISBN10: 091062755X
• Format: Paperback
• Copyright: 2006-05-15
• Publisher: Atlantic Pub Co

Summary

This new book will provide you with a road map to securing the financing. The book goes into traditional financing methods and assists the reader in setting up proper financial statements and a proper business plan. It details the differences between debt and equity financing and how and why to use each. Valuation techniques are explained for determining what your business is truly worth. However, the book's real strength is in explaining alternative and creative methods of financing, such as SBA financing, investor angels, IPOs, limited public offerings and venture capital. Essential resources for finding the detailed information you need are included throughout.

Table of Contents

Introduction
Did You Know?	16	(1)
Money, Money, Money	16	(3)
Learning Your Money Formula
Be Prepared	19	(1)
Develop an Elevator Pitch	20	(1)
Know Your Investors	20	(1)
Focus Your Search	21	(1)
Plan Ahead	21	(1)
Be Flexible	21	(1)
Remember to Mind the Store	22	(1)
Build a Strong Team	22	(1)
Write a Lean and Mean Business Plan	23	(1)
Ownership Versus Control	23	(1)
Stay on the Right Side of the Law	23	(4)
Hire a Lawyer	24	(1)
Create Strong Agreements	24	(1)
Keep Good Corporate Records	25	(1)
Write Good Employee Policies	25	(1)
Define Partnership Agreements	26	(1)
Protect Yourself	26	(1)
Secure Your Intellectual Property	26	(1)
Resolve Conflicts Wisely	27	(1)
Capital Budgeting	27	(4)
Restrictions	27	(1)
Priorities	28	(3)
The Money is Out There
Six Ways to Finance a Business	31	(2)
Before You Search	33	(1)
Exploring the Options	33	(1)
What Will You Do to Finance Your Dream?	33	(1)
Available Financing Sources	34	(1)
Give It -- Your Personal Investment	35	(3)
Investing Your Money	35	(1)
Home Equity Loans	36	(1)
Leveraging Your Credit	37	(1)
Borrow It -- Loans to Repay	38	(2)
Loans from Family and Friends	38	(1)
Loans from Commercial Lenders	39	(1)
Lines of Credit	39	(1)
Sell It -- Shared Ownership	40	(2)
Family and Friends	40	(1)
Angel Investors	40	(1)
Venture Capital Firms	41	(1)
Earn It -- Creative Ways to Raise Cash	42	(1)
Saving	42	(1)
Bartering	42	(1)
Buying Groups	42	(1)
Rebate Programs, Co-op Marketing Funds, Support Freebies	42	(1)
Competitive Awards	43	(1)
Employee Ownership Programs	43	(1)
Pledge It -- Good for You and Your Community	43	(1)
Share It -- Win-Win Situations	44	(1)
Factoring Accounts Receivables	45	(1)
Other Financing Methods	45	(12)
Customer Financing	46	(1)
Purchase Order Financing	47	(1)
Credit Card Financing	48	(3)
Mergers/Strategic Alliances	51	(1)
Lease Versus Buying	52	(4)
Employee Stock Ownership Plans	56	(1)
Your Business Plan
Sounding Great	57	(1)
The Business Plan	58	(1)
Who Will Need Your Business Plan?	59	(1)
Confidentiality and Nondisclosure Agreements	60	(1)
The Structure of the Plan	61	(6)
The Executive Summary	62	(1)
Your Plan Outline	62	(5)
Who Should Write My Plan?	67	(1)
What It Will Cost You	68	(1)
Searching for a Business Plan Writer	69	(1)
Tell Them What You Need	69	(1)
Tell Them What You Want	69	(1)
Tell Them When You Need It	70	(1)
Tell Them What Resources You Have	70	(1)
Write an RFP	70	(1)
If I Could Only Write an RFP	70	(1)
Contracts and Agreements	71	(1)
Help! I'm Writing My Own Business Plan	71	(1)
Web-Based Advice	72	(1)
Business Plan Classes	72	(2)
Seminar Workshops	74	(1)
Software-Specific Classes	74	(1)
Books	74	(1)
Business Plan Software	75	(1)
Too Good to Be True	75	(1)
Try Before You Buy	75	(1)
Accounting Software	76	(1)
Word Processing Software	76	(1)
Spreadsheet Software	76	(1)
Presentation Software	77	(1)
More Free Templates	77	(1)
Business Plan-Specific Software	78	(5)
Stand-Alone Products	79	(3)
Template Products	82	(1)
For Mac Users	82	(1)
Online Planning	83	(1)
Check with a Trade Association	84	(1)
Still Don't Know What to Buy?	84	(1)
``Blank Screen, Go Away''	84	(1)
Coping with Writer's Anxiety	85	(1)
Error-Free Writing	85	(1)
Does Your Plan	86	(3)
Presentation of the Plan	89	(1)
Writing Tips	90	(5)
Mission Statement	91	(4)
Organize Your Research	95	(6)
Investing in Your Own Dream
Your Personal Financial Health	101	(4)
Fix It	102	(1)
Clean It Up Yourself	103	(1)
Improve Your Credit Score	104	(1)
Create an Asset List	105	(1)
Other Assets	106	(1)
Other Ways to Raise (or Save) Cash	106	(1)
Bartering	107	(2)
Neither a Borrower Nor a Lender Be
Should You Ask?	109	(2)
Know How Much You Need	111	(1)
Borrowing from Family or Friends	111	(1)
Loan Agreements	112	(1)
Promissory Notes	112	(1)
Asking for a Loan	113	(1)
Thanks for the Gift	114	(2)
Money from Trusts and Inheritances	116	(1)
Your Loan Proposal
More Than an Application	117	(2)
Essential Components of a Loan Proposal	118	(1)
Loan Request Summary	118	(1)
Financial Statements	119	(2)
Startup Businesses	119	(1)
Established Small Businesses	119	(1)
Larger Businesses	119	(2)
Your Financial Statements	121	(3)
The Income Statement	121	(1)
Statement of Capital	122	(1)
The Balance Sheet	122	(1)
Cash Flow Statement	123	(1)
Financial Statements	124	(1)
How to Write a Loan Proposal	124	(2)
General Information	124	(1)
Business Description	125	(1)
Management Profile	125	(1)
Market Information	125	(1)
Financial Information	125	(1)
How Your Loan Request Will Be Reviewed	126	(1)
Valuation of Your Business
An Elusive Figure	127	(2)
Comparables	129	(7)
The Venture Capital Method	131	(1)
The First Chicago Method	132	(1)
Ownership Dilution	132	(1)
Discounted Cash Flow	133	(1)
Asset Appraisal	133	(3)
Debt Financing Versus Equity Financing
Financing Types	136	(1)
Types of Debt Financing	136	(1)
Types of Equity Financing	136	(1)
Debt Financing	137	(2)
Equity Financing	139	(5)
Uncle Sam Helps Out
The 7(a) Loan Guaranty Program	144	(5)
The Guarantee	144	(1)
The Interest	145	(1)
Maturity Schedules	146	(1)
7(a) Eligibility	146	(1)
The Application Package	147	(1)
Prequalification Program	148	(1)
Your Personal Guarantee	148	(1)
Prohibited Fees	148	(1)
Prepayment Fees	149	(1)
Special-Purpose Programs	149	(6)
Disabled Assistance Loan (DAL) Program	151	(1)
7(a)11 Program	151	(1)
Solar Energy and Conservation Loan Program	151	(1)
Export Working Capital Program	151	(1)
International Trade Loan Program	152	(1)
Employee Trust Loan Program	152	(1)
Veterans' Loan Program	152	(1)
Pollution-Control Loan Program	152	(1)
Defense Economic Transition Loan Program	152	(1)
LowDoc Program	153	(1)
SBA Express Loan Program	153	(1)
SBA Export Express Loan Program	153	(1)
Community Express Loan Program	154	(1)
CAPLines Loan Program	154	(1)
Ineligibility for 7(a) Loans	155	(1)
Section 504 Program (CDC Loan Program)	155	(2)
SBA Loan Drawbacks	157	(1)
The Application Process	157	(1)
Small Business Investment Corporations	158	(4)
Obtaining SBIC Funding	160	(2)
Grants
Searching for Grants	162	(1)
Private Grant Databases and Guides	163	(1)
Grants for Nonprofits	163	(1)
Private Grants	163	(1)
Grant Writing Assistance	164	(1)
Hiring a Grant Writer	165	(1)
Caveat Emptor	165	(1)
It Takes Time	166	(1)
Venture Capital
About Venture Capitalists	167	(1)
Where Does the Money Come From?	167	(1)
Is Venture Capital the Way to Go?	168	(1)
Are They Interested in Your Idea?	169	(1)
The Right Match	169	(1)
More Value Than Money	170	(1)
Reward Versus Risk	171	(1)
Stages of Financing	171	(1)
The First Round	172	(1)
The Second Round	173	(1)
The Third Round	173	(1)
Finding a Venture Capitalist	174	(3)
Make It Find You	174	(1)
Get Introduced to VCs	175	(1)
Find a Seeker	176	(1)
Money for Minorities	176	(1)
What to Avoid in a Venture Capitalist	177	(1)
Asking Questions	178	(1)
The Long Road to Obtaining Venture Capital	179	(4)
Begin with an Idea	179	(1)
Write a Business Plan	180	(1)
Find Seed Capital	180	(1)
Build a Prototype and Beta Test It	180	(1)
Modify Your Plan	181	(1)
Sell Your Product, Build the Company	181	(1)
Venture Capital, Finally	182	(1)
Investor Angels
Who Are Angels?	183	(1)
The Equity Choice	184	(1)
Angel Support	184	(1)
Exploring the Types of Angels	185	(1)
Angels, Generally Speaking	186	(1)
The Core Angel	186	(1)
The Tech Angel	186	(1)
The Silent Angel	187	(1)
Other Angels	187	(2)
Recent Angel Trends	189	(1)
The Dot-Com Boom	189	(1)
Getting Back on Track	190	(1)
Angels' Challenges	190	(2)
From the Angel's Perspective	190	(1)
How Angels Find Deals	191	(1)
Active Capital -- The SBA Connection	192	(1)
Deciding Which Deals Are Right	193	(1)
Deciding How Much Assistance to Give	193	(1)
Attracting Angel Investors	194	(5)
What Angels Want	194	(1)
Making Contact	195	(1)
Networking	196	(1)
Media Attention	196	(1)
Events	197	(1)
Angel Lists	197	(1)
Internet Matching Services	197	(1)
Referrals	197	(2)
What Angels Look For in Entrepreneurs	199	(3)
Initial Public Offerings
The Big Decision	202	(1)
Benefits and Drawbacks	203	(2)
Benefits	203	(1)
Drawbacks	204	(1)
Paperwork	205	(1)
IPO, Preparation	206	(6)
Putting the IPO Team Together	206	(2)
Generally Accepted Accounting Principles	208	(1)
Forms	208	(1)
S-1	209	(1)
SB-1	210	(1)
SB-2	211	(1)
Preliminary Pricing	211	(1)
The Prospectus	212	(1)
Your Comment Period	212	(1)
Soft Information	213	(1)
Road-Show Presentations	213	(2)
Final Pricing and Closing	215	(1)
Garnering Interest	215	(1)
Your Quiet Period	216	(1)
Post-IPO Activity	216	(1)
Rewards and Consequences	217	(1)
Up-to-Date Information	218	(2)
Direct Public Offerings
The Function of the DPO	220	(1)
Different Ways to Proceed	220	(2)
Registering in Full with the SEC	221	(1)
Filing Through Regulation A	221	(1)
Small Company Offering Registration	221	(1)
Other Exemptions	222	(1)
The Benefits of a DPO	222	(1)
The Trouble with a DPO	223	(1)
Selling Your DPO	224	(1)
The Power of the Internet	225	(3)
Web DPO Sales	227	(1)
DPO Advice	228	(1)
The DPO Project Manager	229	(3)
Strategic Alliances
Mergers	232	(4)
The Triangular Merger	233	(1)
The Forward Merger	233	(1)
The Reverse Merger	234	(1)
The Reverse Triangular Merger	234	(1)
Taxable and Tax-Postponed Mergers	234	(1)
Common Merger Procedures	234	(1)
Positioning the Company	235	(1)
Assembling the Team and Garnering Support	235	(1)
Contacting Prospective Buyers	236	(1)
Moving to Close	236	(2)
Letter of Intent	237	(1)
Due Diligence Period	237	(1)
Definitive Agreement, Voting, and Closing	237	(1)
When to Disclose the Deal	238	(1)
Leverage	239	(4)
Financial Leverage	239	(1)
Operating Leverage	240	(3)
Legal Considerations
Accredited Investors	243	(1)
Blue-Sky Statutes	244	(1)
Conflicts of Interest	244	(1)
The Equal Credit Opportunity Act	245	(1)
Legalities Concerning Investments from Family and Friends	245	(1)
IPO Regulations	245	(1)
Private Placement Memorandum	246	(1)
Angel Solicitation	246	(1)
Securities Regulations	247	(2)
Rule 504 of SEC Regulation D	247	(1)
SEC Rule 1001	247	(1)
The Model Accredited Investor Exemption	247	(2)
The Pitch
First Impressions Are Critical	249	(4)
Looking Good -- Physical Preparedness	249	(1)
Men	250	(1)
Women	251	(1)
Exceptions to the Rules	252	(1)
High Anxiety	253	(1)
Getting Your Brain Ready -- Mental Preparedness	254	(1)
Don't Worry	254	(1)
Use Fear	254	(1)
Your Ideas (and Soul) on Display -- Emotional Preparedness	255	(1)
Know the Truth	255	(1)
Dealing with No	256	(1)
Passion Speaks	256	(1)
Rehearse, Rehearse, Rehearse	257	(1)
Ready for Success	258	(3)
Glossary
Glossary of Terms	261	(4)
Resources
Angel Investor Resources	265	(1)
Bartering Resources	266	(1)
Business Plan Resources	267	(1)
Business Structure	268	(1)
Credit Bureau Addresses	269	(1)
Credit Reporting/Scores	269	(1)
Debt-Financing Resources	270	(1)
DPO Resources	270	(1)
Equity Financing Resources	271	(1)
Feasibility Study Resources	272	(1)
Financial Statement Resources	272	(1)
General Business Financing Information	273	(1)
Industry Demographics and Research	273	(1)
IPO Resources	274	(1)
Leverage Resources	274	(1)
Loan Proposal Resources	275	(1)
Research Methods	276	(1)
SBA Financing Resources	276	(2)
State-by-State Directory of SBA District Offices	278	(11)
Small Business Development & Support	289	(1)
Training Classes, Seminars, Workshops, and Web-Based Education	289	(1)
Valuation Resources	289	(2)
Venture Capital Resources	291	(1)
State-by-State Directory of Venture Capital Clubs and Networks	292