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Brokers, Dealers, Private Lenders, and Venture Capital

Written by: Ilya Bodner

Article Overview: A broker is defined as anyone who makes securities transactions for others. (The exception to this is a bank.) A dealer is defined as someone who buys and sells securities for their own account, through a broker or otherwise. Most entrepreneurs are looking for start-up capital and for someone else to raise capital for them on a straight commission, with no up-front fees. Only registered broker dealers, and Bona Fide employees, can legally solicit/sell securities for a company on straight commission, with no up-front fees. They always charge an up-front retainer, sometimes called due-diligence fees, before commencing. This fluctuates depending on the complexity of the transactions. Most brokers/dealers avoid startup and early stage companies. A Bona Fide employee cannot be paid commission from the sale of securities.

Brokers, Dealers, Private Lenders, and Venture Capital

BROKERS & DEALERS A broker is defined as anyone who makes securities transactions for others. (The exception to this is a bank.) A dealer is defined as someone who buys and sells securities for their own account, through a broker or otherwise.

Most entrepreneurs are looking for start-up capital and for someone else to raise capital for them on a straight commission, with no up-front fees. Only registered broker dealers, and Bona Fide employees, can legally solicit/sell securities for a company on straight commission, with no up-front fees. They always charge an up-front retainer, sometimes called due-diligence fees, before commencing. This fluctuates depending on the complexity of the transactions. Most brokers/dealers avoid startup and early stage companies. A Bona Fide employee cannot be paid commission from the sale of securities.

A statistical report which gathered data from electronic filings by registered investment advisers with the Securities and Exchange Commission (SEC) as of April 7, 2006, showed more than 75% of clients are hedge funds, dealing with 1,336 hedge fund firms, an increase from 1,092 firms previously registered. This leaves little room for the small businesses. Total assets managed (AUM) by SEC registered investment advisers totaled $31.4 trillion, increased by 17.2% over 2005.

PRIVATE LENDERS & VENTURE CAPITAL

Venture Capitalists are worth a second glance in the context of alternative financing. Venture capitalists are private loan lenders that have relatively high standards for loaning money to small businesses.

Generally, venture capitalists shy away from start-up businesses in most industries, unless the owner has a history of success. They tend to be private loan lenders that focus on small business financing for high-tech companies. They expect a company they fund to have experienced and diverse management that will drive a fast-paced growth model. Venture capitalists expect a very high return on their investment. For these reasons, venture capitalists, like "angel investors," are only a reality for the most well-planned business owners.

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Article Tags: alternative financing, broker dealers, due diligence, early stage companies, electronic filings, fide employee, fide employees, growth model, paced growth, private lenders, private loan lenders, registered investment advisers, second glance, securities and exchange commission, securities transactions, small business financing, start up capital, statistical report, straight commission, venture capitalists



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Del Castienne - International Business and Project Brokers - In addition to the above, Del Castienne is an international brokerage firm specializing in various entrepreneural services. Del Castienne is more than just a brokerage, as we facilitate Private International Venture Capital for Business and Projects from Commodity Speculation Transactions, MBO, MBI, M&A, Bridging Finance, Patents, Branding, JV, Corporate Advisory Services, Business Plan Development, etc.. Del Castienne is linked to 1200 private international Venture Capital consortiums and Funding Syndicates with a funding capacity of $ 115 billion and 5000 international Investment Bankers and Business & Project Brokers. This in itself should provide you with a gateway to the best source of funding in the world. Through Del Castienne any entrepreneur can have up to a potential success rate of 25% (conditions apply) with absolutely no up front costs. Del Castienne charges a maximum of 5% commission which is far below the international standard of 10% - 12% on project value. If you are tired of running back and forth with countless dissappointments, please give us an opportunity to assist you. Our minimum Venture Capital amount is $1 million and we a Commitment Letter can be provided with in 30 days after formalities are in place and your information was received.
How to valuate a business - Hi Garth - here is how we did it at Northern Crown Capital when I was helping them raise venture capital for Toronto-based entrepreneurs. Assume the start date is 2003 so 2008 projections are 5 years out: How Northern Crown Capital Valuates a Business 2008 Financial Projections Earnings Before Tax $5,865,000 Tax Rate 42% Taxes $2,463,300 Net Earnings $3,401,700 Amount Seeking to Raise Today $3,500,000 Discounted Value of Future Opportunity, 5 Years Out 2008 P/E Ratio 15 Value of Company in 2008 $51,025,500 Discount Rate Applied 30% Year 2008 $51,025,500 Year 2007 $35,717,850 Year 2006 $25,002,495 Year 2005 $17,501,747 Year 2004 $12,251,223 Value of Company at Investment in 2003 $12,251,223 Less: Investment Amount $3,500,000 Present Value $8,751,223 Discount for Risk & Private Company 40% Less: Discount for Risk & Private Company $3,500,489 Private Company Value $5,250,734 Present Value (What the Owner Keeps) $5,250,734 60.00% Financing (What the Investor Gets) $3,500,000 40.00% Total $8,750,734 100.00% I hope this helps!
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