Start-up Capital – The Egg or the Chicken

We see many business ideas which project earning many thousands or millions of dollars in sales revenue and sometimes at a very fast pace. Typically, a group of individuals working in a specific market with years of experience conceive of a way to improve a process and or create a new distribution channel. This can be a very exciting time when you have a clear picture and idea of how to make something work better or to your benefit with the goal of creating a new company.

We review forecasts, business plans and strategies with the key goal of acquiring capital to make the dream come through. We see the projects needing capital otherwise they wouldn’t be sent to us. The ideas we don’t see are usually funded by several partners using retirement money, equity from their homes or savings. Friends and family will pitch in for a small piece of the pie and by combining those resources it can sometimes be enough to make things work. But when those sources are not enough then plan “B” is needed.

Plan B can be taking your project to an angel group investor, an investment bank or finding another equity partner(s) to invest in your business. In each case, you will be giving away part of the company ownership which includes some control as well. We know this is a hard pill to swallow for entrepreneurs which often have studied their idea for years and have poured endless sweat into it but the reality is it’s better to own a small part of something than all of nothing.

We have helped small start-up business owners when their capital needs are in the $500K range and less but those are particular cases in which collateral like real estate, heavy machinery and industrial machines are available to lend against. Then a sales/leaseback or collateral loan can be structured. Credit profile and background history has to be strong since it also makes up a component of what underwriting considers. We refer larger capital requirements to the experts which focus on that market specifically like the investment banks and angel groups we mentioned which are in numerous supply. Prior to approaching any of these sources a complete executive business package should be compiled including market forecasts, projections and ownership expertise to indicate you are fully prepared for your new endeavor.