A large business that is profitable and has been in operation for at least three years has many ways to obtain financing for expansion or general corporate purposes including banks, finance companies, issuance of stock in a public offering (IPO), private capital, venture capital, and strategic partnerships. If profitability is low or the company has been losing money and needs to finance a turnaround, its options become somewhat limited to private and venture capital that seeks turnaround projects. If the company is a start-up, its options are limited to speculative investors such as angel or venture capital funds.
Research the type of financing you will likely need. If you are planning to purchase equipment, you will need short-term financing in the form of equipment leases or revolving lines of credit. If you need to finance payroll, get payroll financing. Factor your receivables if your customers are paying too slow to allow you to maintain inventory. These short-term financings can be obtained at a bank or finance company. Long-term large money financing comes from private or venture capital or via the issue of equity or debt securities in the public markets.
Compile a due diligence book. This contains copies of your legal papers including incorporation, bylaws, minutes of board meetings, employment contracts, mortgages, titles to property and machinery, leases, patents, trademarks, copyrights, corporate identity graphics and colors, service contracts with attorneys, accountants, marketing firms, and any major business contracts. All this will be important during the process of seeking funding, particularly if you will be approaching private or venture capital firms and investment banks.
Decide what you are prepared to accept in the terms of the financing. If your company is very large, financially secure and has a lot of unencumbered assets, your chance of obtaining bank financing for nearly any project are excellent, but bank financing may not provide the amount or type of funding you need. If your project is large enough to require the amount of money available through a public offering of stock or debt, can you wait at least six months for the money? If you are trying to fund a reorganization or if you are a new company, you will probably have to give up a percentage of ownership in your company, possibly even a controlling interest, plus several voting seats on your Board of Directors. If you are a public company, you must meet special compliance obligations.
Establish the reason you need funds, how much money you need, what you expect the addition of these funds will do for your company, and write a business plan describing what you wish to do and supporting your needs, assumptions and financial projections.
Hire a financing specialist. This might be a major law firm that specializes in banking and finance, a brokerage firm, a major accounting firm, or a financial consulting firm. Asking your local EDC (Economic Development Corporation), SBA office (Small Business Administration) or the corporate finance department of your bank would help you find the best professional service providers if you feel you cannot find expert help.
评论