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Issuing shares privately is a viable way for small and growing businesses to raise capital, exempt from many registration and reporting requirements. Here are the rules you need to know.
Entrepreneurs could give their budding companies a powerful financial boost by using a source of funding usually considered off limits--the retirement kitty. The author, a certified financial planner, does, however, caution company builders to leave a portion of those funds intact, using more accessible sources first. Thereafter, he argues, tax-deferred assets in a 401(k), SEP, or IRA comprise a personal venture capital fund that can do as much for an individual's business as for his or her golden years.
Accepting a loan from the most respectable source of business financing--namely a commercial bank--is a mistake for some entrepreneurs, argues the author, who recounts the tale of her company's demise subsequent to her signing a bank loan with overly stringent terms. She includes four pointers that can help you flag loans likely to go bad.
Entrepreneurs hoping to preserve wealth may want to avoid selling big stakes in their businesses to raise capital. The founder of a major mutual-funds company built his net worth by selling preferred, rather than common, stock.
Any entrepreneur who hopes to raise capital from individual investors, so-called "angels," should be properly prepared with a presentation, business plan, list of potential angels, and outline of the opportunity his or her new venture affords. The author explains that it's also important to avoid making such mistakes as allowing investors to have too large a stake in the enterprise. That could cause problems should the company fail, he writes, in an article filled with specific tips for dealing with these financiers.
Venture capitalists aren't the vultures they're said to be. They're just investors, and the key to dealing with investors is having a relationship, according to this witty exchange between the author and her construct, the Everyman-entrepreneur, who discuss financing at a typical gathering for entrepreneurs.
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