Loan Brokers
Loan brokers work on commission, and can some times put a deal together when no one else can. Never pre-pay a loan broker in advance, they should get paid from the loan proceeds. I have never met anyone who pre-paid a broker that actually got the loan. Some loan brokers have access to private money sources that you cannot find any other way. Brokers have a better chance of finding you a loan if the loan is real estate based. You may pay a higher rate of interest for broker-ed loans. The paperwork the broker will require is similar to a bank loan.
The best and safest way to locate a broker is to ask your banker friend, or accountant. Other then that, traditional sources such as trade magazines, online, and yellow pages.
Factoring
Factoring involves selling your accounts receivable. When your company ships merchandise to another company, the factor, advances you a percentage of the invoice amount, your customer then pays the invoice payments to the factoring company, they deduct their advance to you and a fee and forward you the remainder. Expect to pay about 2% of the invoice amount. Factoring is hard to get in amounts under $1,000,000 per year of billings. Each company will have its own procedures. Look for factors in the yellow pages and on line as well as most big banks.
Leasing
Leasing is a good way to finance equipment. Leasing need not show on your company's balance sheet. Lease payments speed up tax deductibility on some equipment when compared to standard depreciation schedules. With the new tax law this is less important, see your accountant for a full explanation, as each business is different.
Leasing can be more expensive then financing because of the higher interest rates, and residual value pay out at the lease end. Leasing companies are easy to find in the yellow pages and on line. Most leasing companies will want to see two years business tax returns.
Another little known problem is that personal property taxes on the leased equipments value, is added to your lease payments at the full value tax rate until the lease ends rather then at the depreciated rate. For example: If you lease computers you are paying taxes in year three, at the same rate as year one, as if the equipment is still new, even though the real value after three years is closer to 20% of what you paid. When you fill out a county tax inventory value request do not include leased equipment as you will pay taxes twice on the leased items.
Vender Financing
Most manufactures who sell merchandise for resale will give terms of net thirty days, and on seasonal goods as much as six months. Keep in mind that short-term money like this is risky if the products do not sell, or you do not practice very good money management.
Floor Plan Financing
Some manufactures of high priced goods will have longer term finance deals or floor plan financing worked out with companies such as Textron corp. Floor plan finance companies lend on large, high ticket items with serial numbers that can be tracked. Examples are R-Vs, appliances, spas etc. Most of these companies will expect the manufactures participation and a minimum of two years in business.
The way floor plan works is the manufacture ships you goods for re-sale and the floor plan finance company pays the vender. The vender pays the first few months' interest and you pay up to six months interest after that. Interest rates will very from1% to 2% per month. Every deal is different so use this as a rough idea of how the financing works.
I have only provided one floor plan vender's web link because I am familiar with them having used them for floor plan financing when I was in the spa sales business years ago. They do offer other types of financing as evidenced on their web site. http://www.tfc.textron.com/index2.html
Owner/Seller Financing
Always ask for owner financing. If you are buying a business, be aware that at least 90% of all businesses sold are partly owner financed. Real estate is often owner financed, if for no other reason then to spread out the seller's income tax liability. Real estate can be owner financed, and the seller can then borrow money using the note as collateral to get money now, and make their payments out of your payments to them. If you are buying business equipment, ask the seller to arrange the financing.
Venture Capital
Venture funds look for large deals where the underlying business will make a fundamental industry change. The goal of a venture capital fund is to cash out in five years with annualized returns of 20% plus. They will expect you to go public, or sell out to a public company. If you have an industry shattering idea or product, and the experience management team to pull it off, and a specific competence, such as software, or patents, to back it up, by all means go for the gold ring.
Selling Stock
The statutory requirements to sell stocks are more then most small businesses want to deal with, or more then they can afford to comply with. The requirements are quite extensive, and a visit to the bookstore will reveal lots of good books on the subject. To sell stocks on a national basis requires a minimum of four million dollars in assets, and lots of paperwork, an investment banker is a necessity. Cost to go public will more then likely exceed a half million dollars, and take at least a year. To sell stocks on a statewide basis requires a registration with the state and lots of paperwork.
Under regulation "D" of the security and exchange commission you can sell up to 1,000,000 in stock with out a filing with the security and exchange commission. The filing is at the state level. This is still a highly regulated undertaking, and must be handled with professional assistance. Check with your secretary of state. Cost to go public statewide can run $100,000 plus. In both cases you will need an attorney, a CPA, and some one to sell the stock. See link below for help.
More information is available at the sec's web site, at the small business link.
A Google search found lots of resources on the subject. The Sec's web site links is shown below. A search for secretary of state by state name produced the web site for my state's secretary of state, and information on assumed names, corporation's, and partnerships, and information about business corporation filings, and regulations.
http://www.sec.gov/http://www.regdresources.com/profile_main.cfm
Note: A private company selling Reg-D help. We are not affiliated with this company.
Recommended Reading
Guerrilla Financing : Alternative Techniques to Finance Any Small Business.
Published by Houghton Mifflin, 1992 ISBN 0-395-52264-1 US $11.95