Raising Capital For Dummies Cheat Sheet
The prospect of raising business capital can be daunting. Your efforts to raise capital for your business or business venture can go more smoothly, however, if you make use of the Web sites that offer advice and resources. And, of course, no deal is done until the paperwork is done, so you need to pay attention to the forms you might need.
Great Financial Web Sites for Raising Capital
If you’re trying to raise capital for your business venture, you can turn to a considerable number of comprehensive Web sites for financial information. Strengthen your quest for capital by visiting these sites:
VC Experts has a simple mission statement: “To leverage the power of the Internet to minimize the inefficiencies in the venture capitalization process.”
Beyond its matchmaking service, Garage Technology Ventures offers forums for discussion of venture capital issues, conferences, a start-up recruiting and job-finding service, and plenty of links to other Web sites of interest.
Explore ACE-Net if you’re looking for financing in the range of $250,000 to $5 million — amounts too high for debt financing but too small for most venture capitalists.
Through its direct loan and loan guaranty programs, the Small Business Administration (SBA) has provided millions of dollars of financing to thousands of small businesses — many of them unable to obtain loans from any other source. If yours is a small business, be sure to give the SBA a try.
Quicken has its own small-business Web site, chock-full of all kinds of useful financial information and tools for small and growing businesses.
The Beyster Institute for Entrepreneurial Employee Ownership runs a great Web site that offers loads of information about employee ownership, including an extensive resource library, financial tools, and an online magazine.
Top Ten Forms for Raising Capital
Like anything else in business, if you want to raise capital, you need to fill out plenty of forms — red tape must be cut — before you can get much done. The following list contains the more important forms when it comes to raising capital:
1. Articles of Incorporation provide the overall capital structure and set bounds on the equity classes — especially for classes other than common stock.
2. Stock Subscription Agreement can have a few important angles on defining the rights of the class of shares being solicited.
3. Preferred Stock Designation further defines the rights and benefits of a preferred shareholder — beyond what is contained in numbers 1 and 2.
4. Convertible Preferred Stock Designation like the preferred stock designation (in number 3) but for a convertible.
5. Unsecured Loan may apply to bank and other loans.
6. Secured Loan more typical loan secured by your assets or a portion of them such as receivables.
7. Agency or Underwriter’s Agreement agreements used to engage a placement agent or underwriter.
8. Confidentiality Agreement a wide range of terms is included in a confidentiality agreement; a restrictive example would be good to see and is especially appropriate for a sale or merger transactions.
9. Letter of Intent (LOI or term sheet) is the key agreement that outlines the general terms for a sale or merger.
10. Due Diligence Checklist is the outline of what a buyer can expect to be able to inspect to assure him- or herself that the price and terms in the LOI are satisfactory so that the transaction can proceed.