Let’s finish up our mini-series on what you need to avoid doing if you want to be successful in getting the funding you need for your business or project. The last time we were here, we looked into the fatal mistakes the Big Three of the auto industry made and the valuable lessons they taught us. Today, we’ll finish up with four more keen insights into the mistakes they, and others, have made in their quest for funding. Here we go:
1. “How are we going to repay you?"
Don’t worry about it . . . We’ll figure something out.”
When the CEOs of GM, Chrysler and Ford arrived last November in Washington to ask for a $25 billion bailout in taxpayer money, they didn’t have any sort of repayment plan ready to present. Suffice it to say, this did not sit well with the members of Congress. The CEOs were sent back home empty-handed and “encouraged” to return once they had a detailed business plan that elucidated how they intended to use the commercial funding they sought and how they planned to repay it.
The lesson? Lenders will never provide commercial funding to a business that doesn’t take the risks they face seriously enough to formulate a repayment plan. If you want to be taken seriously by commercial funding sources, you need to have a well thought out business plan that details how you intend to spend their money and how you will be paying it back. Show lenders that your business acumen is worth investing in and that you are financially responsible and you’ve won half the battle.
2. “You should give us the money . . because we deserve it.”
Chrysler survived in the ’80s thanks to federally guaranteed loans. In the second half of 2008 Chrysler burned through $6.9 billion and was down to its last $2.5 billion. They later stated that they needed an additional $7 billion before year’s end to cover operating costs for the first quarter of 2009.
Given their long standing dependency on taxpayer money, it’s easy to see how they felt entitled to receive billions more in bailout money when they got themselves in trouble, again. Except that this attitude did not fly well with their conventional and private investors which is one of the many reasons why they got turned away everywhere they went.
Think your long history of success and your sharp business skills entitle you to commercial funding? Think again! If the value of your business or the revenues it generates are not proportionate to the amount of funding you seek, you too will be seeing the backside of more than a few investors and lenders.
Lose the attitude. Be realistic with your expectations and the amount of money you really need to accomplish your targets. Only then will you get commercial funding sources to pay attention.
While we’ve certainly learned a great deal from the mistakes of the Big Three, these last two are goofs we see committed by well-intentioned but woefully inexperienced businesses.
3. “The website? I got a great deal on it. I used a template I found for only 99 cents!”
Your website is your face to the world. A frivolous or shoddy looking website with a Gmail or Yahoo e-mail account is acceptable for your teenage daughter’s My Space page. But, it will not do for your online business.
Invest some serious time, effort and money designing a website that presents your business in the most professional manner possible. Your goal here is to inspire confidence and credibility in your brand. This is not the time to cut corners. A simple but elegantly designed website will do wonders to boost your image in the eyes of potential investors and commercial funding sources.
4. Placing an extremely high buy-in for your PPM.
Overvaluing your shares is a sure fire way to ensure that investors steer clear of your PPM. Why? Because in today’s market, more than ever, investors are looking to maximize returns while minimizing risks. By placing a high offering price on your company’s shares you’re asking investors to increase their exposure, not lessen it.
True, you would end up working with a smaller group of investors but, more importantly, you’d also be shrinking the pool of available investors dramatically and this will kill your chances of getting any type of commercial funding.
Raising money with a PPM can go a lot smoother if you lower the par value of your shares and open it up to the maximum number of investors possible. We can’t overstate this enough - offering cheaper shares in greater numbers is the best way to raise large amounts of capital in today’s risk averse market.
A few last words…
The key to successfully raising money today lies in how you approach potential lenders and investors. The right attitude backed by a solid, well prepared business plan will do more for you than anything else you could possibly think of.
Commercial funding sources value professionalism and a strong sense of responsibility and commitment. If you strive to keep this always in the forefront of everything you do, you will be that much closer to raising the funds your company needs to take it to the next level.
After more than 10 years within the construction industry, Joseph Polanco came to understand the intimate relationship that exists between real estate development and financing. As he embraced residential financing, he became involved with sophisticated commercial transactions. However, the more time he spent working on these types of projects the more he felt his clients’ frustrations with the entire funding process. This became the driving force behind Lauton Funding’s focus and singular goal: to ensure that clients enjoy a seamless and gratifying experience. Recognizing how vital it is that the free flow of information between principals and non-traditional capital sources be maintained, Lauton Funding continues to serve as a dynamic nexus throughout the entire funding process.
Joseph is very passionate about his role and implements it throughout; from the first introductory call with a prospect to the successful culmination of the deal. His position within Lauton Funding has allowed him to interact with those seeking funds for a myriad of ventures such as major development projects, residential sub-divisions, medical research, green energy or economic developments in third world countries.
With the realities of our current economic situation, Joseph observes that our way of doing business has fundamentally and irrevocably changed. The conventional business model will always exist; however, those who work with non-traditional firms will capitalize on solutions that would not have been available to them otherwise. In essence, for those in need of funding, there will be more viable capital resources at their disposal from non-traditional entities while the more familiar brick and mortar services continue to struggle to meet their needs.