I am often asked by our business plan software customers to assist them in determining their best options for raising capital. Having been down that path many times, I always try and impart whatever knowledge or wisdom I can to help them smooth the road ahead.
Raising capital is not easy. It takes time, energy and a lot of patience. Unfortunately, there is no one recipe for success. Some companies succeed quickly, while for others it may take months or years to locate that pot of gold. For some, it may never happen.
In many it is pretty clear cut what path a company must take to raise capital. For others, it will make sense to take the time to review the many alternative sources of financing that are out there today. In a white paper I authored earlier this decade, “65 Ways to Finance Your Business”, we took a detailed look at both the well known sources of funding (bank loans, angel investors, etc.) as well as many of the lesser known financing options (SBIR Grants, Life Insurance Policies, Trade Credit, etc.). Since that time, the markets have changed, but I don’t hesitate to say that the number of financing options has probably expanded even further, with options such as crowdfunding emerging over the past couple of years.
The key to determining the best path for your company to raise capital is to understand the universe of funding options available in the marketplace and then do your best to match those to your unique situation.
Are you comfortable giving up a potentially large ownership stake in your company to someone who can exert control over the future of your business? If not, then raising money from an angel investor is probably a bad idea. Can you sleep at night knowing you have given a personal guarantee to your bank for a business loan that is ten times larger than your home mortgage? If not, then speaking with a lender is most likely a waste of your time.
No matter which path you choose, it must fit your business needs and personal comfort level today and well into the foreseeable future. Be sure to do your due diligence, speak with other entrepreneurs about their experience with various financing options and sources, and then select carefully.
Sometimes, you might even find that not raising capital is the quickest and best path to achieving your business goals. One quick story on this point:
In 1991, Darrin Perdue had three partners, with ten years combined flying experience and a vision for growing a jet charter company. His plan was to first raise money and then buy a jet. The first investor laughed him out of his office. Then, while pursuing other investors, Darrin remembered that he knew a gentleman who owned two Lear Jets. Darrin convinced the jet owner to let Darrin’s company, SP Aviation, manage the planes. Since that day, the company has prospered and today is on call 24 hours a day providing jet charter services to executives, celebrities and medical transplant teams throughout Northern California.
Important Lesson Here – Darrin originally thought he needed to raise capital, until he remembered that his goal was to control a fleet of jets. There are many ways to get what you need to build your business – it doesn’t always take lots of money or any money at all. Sometimes, it just takes a mix of imagination, some nerve, and a logical and thorough plan of action.
Photo Source: Horia Varlan