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A
major component in operating a small business is securing affordable
"working capital," long term financing, and equity. The source you
select to finance your business, bank,
 credit union, hard money
lender, local non-profit, economic development office or
equity investor will need to believe in you and your business model.
You must find a way to present your concept which causes them to
believe that your company will not be among the 80% of businesses
which fail in their first 60-months of operations. Your
understanding of the "business life cycle of your industry and
market" will need to be a part of your presentation. It is
also important to know that your bank is financially sound, and can
support you as your company grows. Bank failures are a fact of
life with over 5,000 banks closing in the last 36 months. It is just prudent to not only know
your business; but, know more about the people who want to help you
realize your dream of a successful business. Our 95%
funding success rate on more-than 500 projects since 1989, means we
know what it takes to create a high quality package.
Funding Sources
The funding sources (banks, lenders,
and investors) all focus on four areas when they consider you for a
loan and/or as an equity partner, which includes:
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Does the owner have the experience
to run a successful company?
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Does the business plan demonstrate
a clear understanding of the market, industry, and competition?
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Does the company have acceptable
collateral? and
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What is the "exit strategy" if the
business fails?
 To
a great degree your ability to secure funding will depend upon the
written presentation (business plan, financial, and/or loan package)
you provide to a funding source. Each loan or investor
package should be configured to address the concerns of the funding
source. For example, the business plan you present to an
investor would not the the same presentation you provided to a local
economic development agency. A hard-money lender would have
little interest in your business plan. In fact, if you borrow
money from a hard-money lender your other funding sources might
consider such a loan as a "red flag." As your company
grows and diversifies the kind of funding sources will change.
While you may really only need a "working capital loan" today, you
should plan for the day you will want an equity injection or
long-term financing.
Private Placements
In order to secure capital from private investors, or non-family members, the Securities and Exchange Commission requires the firm issuing the security to prepare a Regulation D Private
Placement Memorandum (PPM). The PPM is required in order to raise capital from individual and institutional investors. The PPM legal document requires a high level of skill and experience and our people are experts in the drafting of this important legal document; which generates funding via the issuing of private shares of stock or security interest.
Private shares cannot be sold as easily. Because private shares represent a stake in a company that is not listed on any exchange, finding a buyer may be difficult. The lack of information about most private companies tends to dissuade investors, who are usually very reluctant to buy into a company that they know nothing about. Hence, the written document (PPM) you provide to each potential investor must comply with the Securities and Exchange Commission's Regulation D Private Placement Memorandum (PPM) requirements.
Simply printing “stock certificates” and accepting money from investors without complying with Regulation D is “securities fraud!” Yes, that's the same Federal law which put Bernard Madoff in Federal Prison for life. Bottom line, if you accept the public's money for securities you must comply with the SEC's Regulation D.
RMD can help your firm develop successful funding strategies for your short and long term needs. Our
network of lenders and investors can enable to you focus on running
your company instead of getting financing. For more details concerning Private Placements click Here.
A review of our
sample engagement agreement will
provide details about the scope of services offered.
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