How To Get Financing For Your Business Venture

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Brief overview: It does take money to make money! There are costs to be covered by entrepreneurs seeking large amounts of $$$. Be prepared for what is a fair cost, and what is not…

“It takes money to make money” is very pertinent when it comes to raising millions of $$$ for a new business. There are very real costs involved in creating that winning business you have in mind. You will soon find that the costs of employing professionals to work on your new project takes a lot of money – unless they are shareholders… You also have the long list of licences, permits and approvals that you shall usually need to acquire. It can get to feel that you’re paying out a lot of money. But that is part of the cost of securing your financial future – this stuff is necessary, and it costs money.

It’s also true that when it comes to raising money from investors you have the costs of getting your business a top quality business plan, cashflow forecasts, and some basic modelling of the business to show that it’s robust and ‘bullet-proof’ in changeable conditions. There are also a few financing consultants who can guide you through the application process with an investor. If they are experienced and capable, they should know what the investor needs to feel safe investing in you and your project.

Without a good business plan you’re not going to get to face-to-face with the investor to make your pitch. Many would-be business developers then find that approaching an investment source costs money too. A broker should only charge for success – a commission at settlement of your financing.

Be wary, and check everything. Since the Global Financial Crisis a huge amount of capital has been destroyed – severely limiting the ability of banks and other financial institutions to fund investment. Be just as wary of the ‘famous names’ as you are of those you’ve never heard of… The company you approach may have been an active investor in the past, but check on how much they are currently investing…

However, an investor may also want to be paid for you lodging an application. This is valid – because they need to know who you are and whether you’re ‘credit-worthy’.

Investor due diligence costs you money – and it can be quite a lot of money. If the investor doesn’t live in your country, they shall want to have their people travelling to make on-site inspections, face-to-face interviews with everyone associated with the project. They have to. It’s unavoidable. If you’ve been working with good people, who can deliver, then they shall be working 12-16 hours a day on the due diligence, and avoiding partying and girls. The other sort you don’t want to be involved with…

Overall budget for the application process to be about 0.5% of what you’re seeking. So if you’re applying for US $50,000,000, that would involve costs of about US$250,000 in the whole process, application and investor due diligence.

Source by David Z Reynolds

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