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Tips on creating documents to secure loans and investor funding.

Written by: Roger Trivelli

Article Overview: The importance of proper documentation when approaching banks and investors for funding. Also contains a few tips on what NOT to do.

Tips on creating documents to secure loans and investor funding.

As an individual with a business idea, or a company just starting off, your main concern is to have adequate capital to run day to day operations and handle all start-up costs. For the majority, business loans and outside investors are a required necessity to secure this capital.

Unlike car loans or home loans, you can not simply walk in, fill out paperwork, and wait for approval. Initiative must be taken, and documentation must be created and presented. Unlike car and home loans, your results are not based on your credit score. For business funding your chances are purely based on your documentation, and the ability of your documentation to answer all potential objections.

In today's globalized economy, you will be approaching VC firms and investors worldwide. Your documents will be forwarded via email, fax, and postal mail. A phone call or walk-in will simply result in your being instructed to forward documentation for any consideration.

Do not pay any company to "broker", "present your documents", or "secure funding" for you. These are operations that are scam operations and are often in business 5-6 months before starting up under another assumed name. They are emailing your docs to the same Venture Capital Firms and Investment Sources that you will be emailing from our listing. Why pay someone to send emails and faxes?

A prospective investor's first impression of your business idea is derived solely from your documentation. It is vital that your first impression does not become your only impression.

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New Funding Source Now LIVE! - Preneuraholics.com is now live and accepting funding requests! Preneuraholics Unite was created for those that have not been able to secure funding through loans, venture capital, angels or grants. This is new concept using peer to peer GIVING. No more loans! This is all about entrepreneurs helping each other. It's time for change to the system of funding. Check it out below (signature) and pass it on! Please feel free to ask your questions or give comments here.
Private Venture Capital Consortiums and Funding Syndicates - From the posts in this forum (all threads) it is very clear that funding is in high demand and many entrepreneurs are unsuccessful in sourcing, not to mention secure, private international venture capital. There are about 6000 international associations linked to venture capital around the globe and they all make their presence noticed on the internet. For most entrepreneurs this will sound very attractive, and it should be, but many unfortunately will stare disappointment in the face at the start of their endevours. The international success rate for venture capital finance / funding in start up projects is an unbelieveable low 2% - 5% maximum. Most venture capitalist linked with associations will require some sort of surity or guarantee of up to 50% of the investment. The entrepreneur will then have to pay fees up front before a cent has been invested, not to mention broker / consultant commissions of up to 12% of the total value of the project. Why is the success rate so low (2% - 5%)? - 1. Business Plan - poor preparation and insufficient information. Every entrepreneur will explain how big a specific market is in potential profits but they all lack the basic important factor every investor wants to see and that is How and What are you going to do to capture 10% of that market sector. Stop telling every investor that you "want" to capture 10%, tell them how you will go about doing so. 2. Management Team - How can anyone expect from an investor to invest in a company with poor management. How about investing $5 million in a one man operation - where is the security for the venture capitalist. Be realistic, put yourself in the position of the investor, argue the facts and then approach an investor if you are able to convince them of your project or business. 3. Project - If your project or business (products or service) is not unique or cheaper venture capitalists will not invest - final. If it is existing technologies, products or services improve them or make them cheaper. Entrepreneurs should always research venture capitalist befire approaching them - it is the difference between success anf failure Always Remember - Plan Your Work, Work Your Plan. ----------------
Re: An additional Need when requesting Funding - [quote="speechlady":tvlfm6si]In addition to capital, it is important that the individual who is requesting funding, consider any assets that they may have which may allow for a "better type of funding" to help with their projects.[/quote:tvlfm6si] While I agree with the business plan information, I do not agree with the above statement, because although a person may be able to secure a better rate with (say) a home equity loan, they are not building a track record for future use with a business lender and that is not beneficial. (Especially if you are a franchisee as most franchisees open more than one unit) and therefore stand to benefit more from building a relationship with a business loan lender from the get go (but this advise definately holds true for anyone going into business. In addition, should you need working capital now or in the future, you may not have enough home equity to support that too. Lenders do not typically approve working capital loans when you finance the business via personal funds.
Re: How to Get Your Business Funded - [quote="intelemark":3hn9vdrv]small business - bank loan will work. [/quote:3hn9vdrv] The problem with this statement is that due to the stringent requirement criteria, the majority of entrepreneurs don't qualify for bank loans. SBA backed loans' basic requirements include: * 20% cash infusion by requestor * excellent credit score * industry experience * strong collateral If even one of those is missing from the equation you cannot even apply. For small startups you can also try peer to peer lending, but even they require strong credit scores and the interest rates can be quite high. A new funding option has been developed, peer to peer giving. Entrepreneurs funding entrepreneurs is a new, innovative concept. See the blog below for more info.
Look For Investors - I would certainly look for loan and investor possibilities before bringing on a partner -- unless a partner brings something in addition to money to the business. There have been numerous posts on the board about a wide variety of financial options. There are bank loans, equity loans, small business loans, small business administration, angel investors and many other options. It is also key to have a qualified person draw up a contract for any agreement. If another person has the contract drawn up, make sure that you have a qualified person review it to look out for your interest. This is important whether you are dealing with friends, family or strangers and it will protect each person involved in the agreement. Chris


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