Thanks to the enormous growth in personal wealth over
the past two decades, there are now more funding
opportunities than ever for entrepreneurs. The rapid
growth of the Internet has made finding investors and
lenders easy, but the legal issues involved in business
financing are complex and should always be reviewed by a
qualified attorney. Know Your Options
Lines of Credit
A line of credit loan is designed to provide
short-term funds to a company in order to maintain a
positive cash flow. Then, as funds are generated later in
the business cycle, the loan is repaid. Most commercial
banks offer a revolving line of credit, where a fixed
amount is available.
Conventional Business Loans
Traditional loans, often called long-term debt, are
often popular initial financing venues for businesses
competing in a proven field. Lenders often include
government-sponsored lending programs, commercial banks,
and small business investment companies.
Business Alliances
A strategic alliance is an arrangement between two or
more companies to pursue a common business objective,
such as a joint venture, merger, or cost-sharing plan. Is
it right for your business?
Angel Investors
Traditionally, angel investors have been business
owners or independently wealthy individuals that finance
businesses in exchange for equity. Increasingly, however,
angels are banding together into local networks that
closely resemble venture capital groups.
Asset-Based Financing
Popular with new companies that are growing faster
than they can make money, asset-based financing is a
system in which lenders accept the assets of a company as
collateral in exchange for a loan. Most asset-based loans
are financed against accounts receivable and less often
against inventory, since receivables are among the most
liquid of a company's assets, followed by inventory.
Venture Capital (VC)
While most banks use past performance as the primary
criteria for deciding whether or not to lend money to
businesses, VC firms make investments based on projected
future potential. Investors generally expect a
substantial portion of the business' equity and/or
profits. Have a qualified lawyer negotiate any investment
deal between VCs and your company.
Investing In Someone Else's Business
Investing in someone else’s business can be a
great opportunity. You may be interested in the business
as a good investment, as a way of helping a family
member, or a way to develop a potential customer.
Small Company Offering Registration (SCOR)
A SCOR is the sale of common stock to the public
without the hassle of an Initial Public Offering (IPO)
through a regulated board such as the NASDAQ or AMEX.
Unlike formal IPOs, in which all or most stock is sold
and monitored through third parties, most companies
involved in a SCOR deal directly with shareholders.
Initial Public Offerings
All offerings of stock and other securities are
subject to the federal securities laws as well as to the
securities laws of any state where the securities are
being offered or sold. Unless there is an exemption that
applies to a given situation, these laws generally
require that an offering go through a difficult
securities registration process.
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