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HOW TO RAISE MONEY FOR STARTING A BUSINESS
The task of raising money for a business is not as difficult
as most people seem to think. This is especially true when you
have an idea that can make you and your backers rich. Actually,
there's more money available for new business ventures than there
are good business ideas.
A very important rule of the game to learn: Anytime you want
to raise money, your first move should be to put together a proper
prospectus.
This prospectus should include a resume of your background,
your education, training, experience and any other personal
qualities that might be counted as an asset to your potential
success. It's also a good idea to list the various loans you've
had in the past, what they were for, and your history in paying
them off.
You'll have to explain in detail how the money you want is
going to be used. If it's for an existing business, you'll need a
profit and loss record for at least the preceding six months, and
a plan showing how this additional money will produce greater
profits. If it's a new business, you'll have to show your
proposed business plan, your marketing research and projected
costs, as well as anticipated income figures, with a summary for
each year, over at least a three year period.
It'll be advantageous to you to base your cost estimates high,
and your income projections on minimal returns. This will enable
you to "ride thru" those extreme "ups and downs" inherent in any
beginning business. You should also describe what makes your
business unique - how it differs from your competition, and the
opportunities for expansion or secondary products.
This prospectus will have to state precisely what you're
offering the investor in return for the use of his money. He'll
want to know the percentage of interest you're willing to pay,
and whether monthly, quarterly or on an annual basis. Are you
offering a certain percentage of the profits? A percentage of
the business? A seat on your board of directors?
An investor uses his money to make more money. He wants to
make as much as he can, regardless whether it's a short term or
long term deal. In order to attract him, interest him, and
persuade him to "put up" the money you need, you'll not only have
to offer him an opportunity for big profits, but you'll have to
spell it out in detail, and further, back up your claims with
proof from your marketing research.
Venture investors are usually quite familiar with "high risk"
proposals, yet they all want to minimize that risk as much as
possible. Therefore, your prospectus should include a listing of
your business and personal assets with documentation - usually
copies of your tax returns for the past three years or more.
Your prospective investor may not know anything about you or your
business, but if he wants to know, he can pick up his telephone
and know everything there is to know within 24 hours. The point
here is, don't ever try to "con" a potential investor. Be honest
with him. Lay all the facts on the table for him. In most cases,
if you've got a good idea and you've done your homework properly,
an "interested investor" will understand your position and offer
more help than you dared to ask.
When you have your prospectus prepared, know how much money
you want, exactly how it will be used, and how you intend to repay
it, you're ready to start
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