Finding Money Advice

About Finding Money: The Small Business Guide to Financing

Finding Money offers a wealth of advice about banking, investing, and business ownership including:

• What′s available: detailed guidance on a whole spectrum of financing sources, including private investors and venture capital funds, banks and finance companies, leasing companies, SBA loans and other government programs, and many more
• How to apply for a loan: what to include in a loan proposal, what criteria are used to evaluate a loan request (including credit scoring), how loans are commonly structured, and what to do if a loan is declined
• Who the investors are and how to pick the right ones for your business: the pros and cons of the different kinds of investments, how investors evaluate business plans and what to include in yours, insider secrets of negotiating with investors, and more
• How much you need: how to calculate the amount of money a business needs to start or to grow, plus hundreds of useful tips on managing cash
• How others have done it: instructive, behind the scenes stories of business financing successes and failures from some of the country′s top bankers, venture capitalists, accountants, and lawyer
• How to negotiate the lowest loan rates and fees; the value of taking trade discounts; lease vs. buy decisions; breakeven analysis; and much more.

Originally published for $24.95 by the nation’s largest business book publisher, John Wiley & Sons, this ebook edition has been revised and updated for 2009. Finding Money answers some of the most frequently asked small business questions:

• What kinds of loans, grants, and other financing are available?
• How much money should I borrow or raise?
• What kind of small business loans or investment am I likely to qualify for?
• How do I prepare a business loan application or investment prospectus?
• How do I prepare an cash flow proforma?
• How do I go about finding venture capital or angel investors ?
• What can I do to bootstrap my business if I can’t find a lender or investor?

Whether you are a small business startup, home based business, or fast-growing high flier, Finding Money will help you navigate the murky waters of how to finance your entrepreneurial dream.

Endorsements / Reviews of Finding Money: The Small Business Guide to Financing

“One of the best books I’ve ever read on the subject” – David Thornburgh, Director Wharton Small Business Development Center “I’ve read some fun, entertaining, and inspirational books by and for small business owners. But lets face it–they won’t pay the bills…. (Finding Money ) is my choice for one of the most useful books for small business owners…books that give high-quality guidance and examples for doing something.” – Orange County Register To start a new business or to expand existing one, Finding Money offers practical, step-by-step advice to attract the right investors. There’s plenty of money out there and plenty of investors, entrepreneurs only need to know how to find it. Finding Money can point the way. – Frank Szivos – Editor, Angel Investor News

Table of Contents for Finding Money: The Small Business Guide to Financing

Section One – Who HAS The Money? Chapter 1 – Lessons from Success Chapter 2 – Debt or Equity? Chapter 3 – Who Are The Lenders & Investors?

• Overview
• Individual Investors
• Banks
• Finance Companies
• Leasing
• U.S. Small Business Administration (SBA)
• Special Government, Quasi‑Government, and Private Initiatives
• Commercial Factors
• Venture Capital Funds
• International Finance
• Mortgage Bankers
• Insurance Companies and Pension Funds
• Public stock offering
• Joint Ventures / Co-ops / Strategic Alliances
• Grants
• Credit Enhancements
• Creative Financing

Section Two – Finding Money From Lenders Chapter 4 – How Lenders Evaluate Your Loan Request

• The Hairy Eyeball Test
• Character…Will You Pay?
• Credit checks
• Background Checks
• Lien and Encumbrance Searches
• Capacity…Can You Pay?
• Collateral…What If You Don’t Pay?
• Capital…How Much Do You Risk?
• Conditions…What Else Might Happen?
• Putting It All Together

Chapter 5 – Structuring Debt

• What Kind of Loans Are Available / Appropriate?
• How Long A Term Can I (Should I) Expect?
• How Much Will It Cost?
• Collateral / Security Structure
• Covenants and Conditions
• Chapter 6 – Choosing a Lender

What Should You Look For In A Lender?

• Referrals
• Bank Size
• Bank Ratings

Chapter 7 – The Interview / Interrogation

• Preparations
• The Visit
• The Meeting
• The Real Issues
• Products / Services:
• Where Do You Stand

Chapter 8 – Your Loan Proposal

• Summary Of The Loan Request
• Historical Balance Sheet And Income Statements
• Financial Statements
• Interim Financial Statements:
• Notes/Explanation To Financial Statements
• Projected Balance Sheet, Income Statement, and Cash Flow
• Summary of Financial Performance

Chapter 9 – Loan Approvals: What Goes On Behind Closed Doors

• Spreads
• Loan Committee
• Approval (sigh)
• Rejection (gasp)

Chapter 10 – Dotting the I’s and Crossing the T’s – The Fine Print

• Finding Money from Lenders: Do’s and Don’ts

Chapter 11 – What To Do If You’re Declined

• Find Out Why You Were Declined
• Consider Professional Help
• Try Other Lenders
• Sharpen Your Loan Proposal
• Reconsider Investment Capital
• Reconsider Your Need
• Go Back To Bootstrapping
• Give It Up

Chapter 12 – What To Do When You’re Approved Chapter 13 – What To Do If Things Start To Go Sour Section Three – Finding Money From Investors Chapter 14 – How Investors Evaluate Your Request for Capital

• Character and Commitment…Are You a Winner?
• Conditions…Can You Pull It Off?
• Capacity…Will It Be Worth It?

Chapter 15 – Deal Pricing

• Business Valuation
• The Investor’s Share

Chapter 16 – Structuring Equity

• Staying out of Trouble
• Advice for Avoiding Securities Law Problems
• Selling Stock

Chapter 17 – Types of Investment

• Convertible Senior Debt or Subordinated Debt
• Convertible Preferred Stock
• Common Stock

Chapter 18 – Terms and Conditions

• Management
• Future Financings
• Controls
• Sample Term Sheet

Chapter 19 – Finding Investors Choosing the Right Investors

• Rules of Engagement
• Compatibility

Chapter 20 – Why Do Investors Invest?

• Private Investors
• Institutional Venture Capital
• Corporate Venture Capital
• Investment Banking Firms
• Small Business Investment Corps (SBICs)

Chapter 21 – The Investment Package

• General Comments about Business Plans
• Executive Summary
• Company description
• Marketing Section
• Operations Section
• Financial Section
• Attachments / Supporting Materials

Chapter 22 – The Decision – Behind Closed Doors

• First Glance
• The Once Over
• Let’s Get Together
• Don’t Be A Stranger
• I’ll Show You Mine If…
• Doing It
• The Morning After
• What If They Say “No”
• Dos and Don’ts for Finding Money from Investors

Section Four – How Much Money do you Need? Chapter 23 – Cash Is King

• Cash Flow Isn’t Profit—and vice versa
• Cash Flow Isn’t Net Worth
• Cash Flow Isn’t Working Capital

Chapter 24 – Developing Cash Flow Projections

• Project Monthly Sales
• Project Your Cash Receipts
• Conduct a Sensitivity Analysis

Chapter 25 – Finding Hidden Cash Treasures

• Increase Your Revenue
• Decrease Your Expenses
• Speed Up Cash Coming In
• Slow Down Cash Going Out

Introduction to Finding Money: The Small Business Guide to Financing

This book was written to help people like you find money to start or grow a small business. It’s not about free money, and it’s not written for dummies or idiots despite the popularity of such titles. It’s also not a book filled with feel-good stories but no real substance. It’s not about knitting, cake decorating, e-bay sales, or multilevel marketing. This book was written to help entrepreneurs and small business owners find the money they need to take a product or service to market or grow an existing business. With the unique economic situation today, and with lending tight, you’d think we wouldn’t have much hope to offer. But finding money today isn’t impossible. As we finished editing, businesses with bad credit, unproven new business ideas, and companies in troubled industries such as construction and auto parts are having a hard time borrowing. But, banks still want to lend to people and companies with a good credit history and collateral. That is, after all, how they make money. . .the old fashioned way. We’ve been helping business owners (including ourselves) find financing for over three decades. Kate worked as a banker, venture capitalist, private investor and financial advisor, so she has experience finding money. Tom ran several successful and not-so-successful high-tech entrepreneurial efforts, and together we started and ran a decidedly low-tech barnstorming business flying vintage airplanes that became the largest in the country. We’ve learned from finding millions of dollars, for ourselves and others, that finding money is an art. While business financing may sound like it’s all about numbers, getting to ‘yes’ is as much art as it is science. Entrepreneurial hopes are dashed every day when lenders and investors decide to pass on “opportunities.” Many of those rejections could have succeeded had the entrepreneur done two simple things differently: approached the right lender or investor, and gone about making their pitch in the right way. Even successful companies can grow themselves broke if they’re not careful. We wrote this book to provide you with insights and insider secrets about when, where, and how to look for capital, who the players are, what they want or need from you, and how to persuade them to lend to or invest in your business. Note: some parts of this book are detailed and technical, but don’t let that scare you. If what you’re reading is more than you need to know, skip ahead to the parts that are more relevant or interesting. Later, when you’re ready to take action, you can come back to the details. Section One – Who HAS The Money? Broadly, there are two kinds of business financing: • You can borrow money and incur a debt, a loan you’ll have to repay; or • You can sell part of your company to investors and exchange part of your ownership (equity) for the money you need. Most businesses use a combination of the two. We’ll cover the pros and cons of each in later chapters, but for most small businesses, the ‘choice’ is one that made for them based on which they’ll qualify for. So what kind of financing do you qualify for, and where can you find it? Chapter 1 – Lessons from Success As a starting point, it’s worth looking at some facts about small business financing. • Most business start with less than $10,000 • Few used outside capital to fund their start-up costs • The majority of small business investment comes from ‘friendly lenders or investors’—those who know you, love you, or like you. • About a third of established businesses are regular borrowers • About half of employer businesses have some form of business loan other than credit cards Even the fastest growing businesses in the country—companies that suck up cash like crazy for inventory, real estate and people—are overwhelmingly self-funded: Inc. 5000 Startup Funding Sources: 82% self financed 22% loans from friends, family, business associates 18% bank loans 18% lines of credit 8% venture capital 4% SBA or other government funds While many company founders would have preferred to use someone else’s money, most start-ups are simply unable to attract lenders or investors because of their unknown future. As companies grow and prove their ability to generate cash flow and operate successfully, their financing needs and options begin to change—typically within two to three years of start-up.

About the Authors

Over the past thirty years Kate Lister has started, operated, and sold several successful businesses. She’s written three business books: Undress For Success–The Naked Truth About Making Money at Home (John Wiley & Sons, 2009), Finding Money–The Small Business Guide To Financing (2009 eBook; formerly published by Wiley), and The Directory of Venture Capital (Wiley 1995). She maintains two business blogs, Undress4Success.com and FindingMoneyAdvice.com, and has written articles for publications including the Wall Street Journal and Entrepreneur Magazine. Kate’s research has been quoted in the Harvard Business Review, USA Today, Washington Post and many other publications. She’s spoken at over a hundred entrepreneurial events throughout the U.S. and Canada. Prior to starting her first business, Kate spent 10 years as a commercial bank lender, private equity investor, and venture capitalist. Tom Harnish, a serial entrepreneur, has spent countless (and frequently fruitless) hours in front of lenders and investors. Always on the bleeding edge of technology, he has learned a thing or two about what to do, and what not to do in terms of raising money. More details about the authors is available on the About page.