photo credit: BAIA

Ever wondered how some seemingly lucky individuals who are not particularly well to do manage to establish profitable businesses with little start up cash? They are obtaining small business grants from the United States government, that’s how. It’s a little known secret, that the most savvy business professional always exhaust their free government money options before investing their own currency in small, or even large business endeavors.

This makes perfect sense. If there is an abundance of government small business grant funding, available to most American taxpayers, for any type of business, why on earth would anyone not apply for it before spending their own hard earned money on overheads and start up costs associated with establishing an new business or company? The answer is, because they don’t know about it.

The United States government is required by law to distribute hundreds of millions of dollars to taxpayers in free government grant programs, but are not required to advertise this generous public assistance funding. Because of this, many potential recipients neglect to apply for it, and millions of dollars in free unclaimed government money is not awarded. A great deal of the unclaimed cash is settled in small business grants that are also unadvertised.

The good news for potential new business owners, or current proprietors wishing to expand, is that by performing a simple free grant search online can direct to the essential funding you will need to finance your endeavors.

The better news is that this is virtually free money to enhance your business ventures that you will never have to pay back. Grants are in way loans, and there is no interest or repayment plan whatsoever. If you are an aspiring entrepreneur, find out what small business grants are available for you today.

Get Grants for Individuals and see how much money you qualify to receive today and never pay back.

->> Claim your Personal Grants..

photo credit: armandoalves

In our investment banking business we are often contacted by business start-ups asking for our help in raising money. I am sure that we were not the first organization that was contacted and that these hopeful entrepreneurs had been searching for months for funding. I try to be helpful and spend time on the phone with these people asking what I consider to be basic Business 101 questions. What is your product or service? What unmet need is it designed to fill? Who else is in your space? How does their product or service compare to your product or service? What is the size of the potential market? Why would a customer switch to your company? How do you plan on selling your product?

Often I am amazed that the entrepreneur has focused inwardly on his hobby or invention or software and has given very little thought to the potential market. Why build a business to sell to a small market segment? Every once in a while, an entrepreneur contacts me and the product or service really hits me as a winner. That is what happened when I was contacted by Russ Notestine, an inventor with a unique product. He had many of the elements mentioned above going in his favor but was still struggling because he had little experience in actually marketing a product. One of the reasons I got interested was that Russ had created a product designed to help back pain sufferers.

Well, that was me, so I was all ears. I had tweaked my back in an athletic event, still approaching the competition with the zeal of a college athlete but trapped in a 50 year old’s body. I was in significant pain and took the usual over the counter pain killers that only reduced the pain by 10%. The next day I could hardly get out of bed my lower back pain was so intense. I called the local chiropractor and began a treatment routine that involved 3 visits per week, heat, electric stimulation and adjustments. I bought my kneeling chair so I could actually work. I even bought the inversion boots so I could hang upside down in an attempt to provide some kind of relief.

My chiropractor got me to the point where I was at least able to be productive at work, but I continued treatments for almost a year. The medical bills were expensive, totaling about $6,000. The really expensive part was the one and one half hours I took out of my work day 2 and 3 days a week. If any of you run your own company, that expense dwarfed my medical expense. Nothing was working for me and I was ready to eat spiders if I thought it could make this problem go away.

Well, Russ tells me that I am not unusual and that 50 million Americans will suffer from at least one bout of serious back pain in their lives. He had passed test number one. There is a huge market for this product. He is explaining how his Vacupractor works and I am thinking (having seen or heard it all from start up companies), oh come on. He says he has this molded plastic shell that is about the size of your back. He tells me that you spray the device with water and then lay down on it. You then pick up your legs and slowly lower them and this creates a vacuum suction as the air is expelled. The device sticks to your back almost like a hard contact lens sticks to your eye. He explained that the suction stretches your back muscles and gently aligns your spine. Given that I was ready to eat spiders, I asked him to send me the Vacupractor.

My back had been OK for a few months so the thing sat in the box for a couple of weeks with little attention from me. I then strained my back again in my next event and I was feeling the beginning of another bout of back pain. I got home and got out the device and sprayed it with water and followed the instructions to expel the air and create the vacuum. I laid on it for about 15 minutes and could feel my back muscles relax. When I got off it, the pain was not completely gone but was considerably reduced. The next morning I got on it again and as I worked that afternoon I suddenly realized that I was not thinking about my back because the pain was totally gone and the start of a potentially long and painful lower back pain bout had been avoided. I couldn’t believe it. I called Russ to tell him about my experience and he said that is pretty much what he hears from other users.
photo credit: Marco Gomes

I was so grateful that I told Russ that I would try to help him with his marketing and sales. We still do not have that solved, but in terms of the other elements for a start up succeeding our entrepreneur has several things going for him:

Huge potential market

Totally unique solution to a painful problem

Cost competitive – the device costs less than 1 chiropractor visit

The potential for a big word of mouth viral marketing boost

Good product gross margins

I don’t think Russ consciously thought about the Business 101 issues when he started. He was a back pain sufferer and an inventor and he had an unmet need because none of the existing products solved his problem. He set out to create a lower back pain remedy for himself and when he got the solution, he thought, wow, I really have something here and there must be a huge market for it. I think he is right. Now if he can figure out how to generate meaningful sales with a limited marketing budget, he has a chance to turn a great product into a great business.

Here is an examples of a business idea that did not pass the Business 101 start up test. I was contacted by a software company that had built the best system for managing the sourcing of clothing to overseas contract manufacturers. They spent $1.5 million in development before doing any research on the competitive landscape. It turns out that for them to be reasonably profitable, they would have to sell the software license for a minimum of $50,000 per company license. The competitive systems in the industry, although not as robust as this one, had 85% of the functionality. They charged a monthly license fee of $300 per month. Our guys were priced way out of the market and literally shut this division down.

What an expensive lesson that should have been avoided before the start. If you are thinking of creating a company, make sure the economics are in your favor before you start. Are your margins going to be high enough to make the company viable? Another huge oversight by these very optimistic entrepreneurs is they figure like in Field of Dreams, if you build it they will come. Save that one for the field of fiction. In business, if you sell it they will come. Even the best ideas and the best products will die if you are not able to achieve meaningful distribution in a cost effective fashion. Go through this little exercise before you start. Who is in my space? How do they sell their product? Is it through a direct sales channel? What does it cost for a salesman to sell the product? What volume can a salesman reasonably expect to sell in a year? What revenues and profits are generated by a salesman at 100% of quota? What is the company’s cost for a salesman at 100% of quota? Does it make economic sense?

The Internet has been a game changer for start-ups with very few barriers to entry. These companies are very easy to start, but almost impossible to scale without some big funding. The sad truth is that the guys that are starting these businesses and getting the funding are guys that have done it before. A great article was recently published in Fortune Magazine about the original founders of Pay-Pal. Well these folks have made investors a lot of money before and the odds are very good that if they did it once, then they can do it again. That theory has been validated with these wizards founding Digg, LinkedIn, Slide, Mozilla, Technorati, and having a significant investment in Facebook.

The VC’s line up to give these guys money. For others it is a painful process of endless meetings and presentations and no money. As a start up company, you have many things going against you. Make sure you are not blinded by your great idea. Think about the market demand, your competition, your margins, your sales and marketing, and getting your company to break even. Do not get distracted trying to attract VC financing at this point. If you can generate enough sales to fund your operations through bootstrapping, you have passed a big test of market validation. If you now need financing to take the company to the next level, then the professional investors will start to listen.

Dave Kauppi is the editor of The Exit Strategist Newsletter, a Merger and Acquisition Advisor and President of MidMarket Capital, representing owners in the sale of privately held businesses. We provide Wall Street style investment banking services to lower mid market companies at a size appropriate fee structure.

photo credit: Valdo Raps

Its no secret most entrepreneurs have limited resources as it pertains to how and where to secure capital infusion. It is these limitations, which precludes small businesses from moving past level one in business and on to a more lucrative future.

There are numerous loan programs and lending institutions servicing small business owner’s nationwide. The problem is not getting the money, it’s how and where to find it. If more business owners knew how and where to secure capital, there would be a larger number of businesses growing and succeeding than those that are dissolving-today.

When our government enacted laws and policies to protect and support our economic system, which is the mainstream source for derived goods and services supplied by the business community, it included providing capital infusion to businesses for the continuity of our economy’s stability and growth. Today there are various resource centers, which provide an array of business development services such as the Small Business Development Centers (SBDC), Service Corps of Retired Executives (SCORE), Women Business Centers (WBC), and Veteran Business Opportunity Centers (VBOC). Take advantage of them, they can be viable to the success of your business.

First things first- you must do your research. You should know: the different types of lenders; what loan programs they offer; how much they will lend you and what is their criteria; what other financing options are available to you and what are their lending policies.

To get you started. There are four types of lenders (1) Traditional Lenders- larger chain banks; strict criteria; larger loans; preferred SBA lender, (2) Third-Party Lenders- community sub-lenders which offer smaller loans and partner with traditional lenders to process loans ranging from $100,000 to Millions, (3) Private Lenders- provides in house financing, offer smaller loans; lower interest rates; flexible criteria and accommodates start-ups, and (4) Investors- require a higher interest rate on their return; part ownership of the business; some will provide management support and have access to viable resources.
It’s very important to know whom you are asking money from. It’s like the term we use “know your competitors inside and out”, well the same principle applies here. Why? to compare financial products that best accommodates your needs. You want to secure the best deal at the best rate. I always recommend my clients prepare a Where’s The Money Strategy. Having this kind of strategy helps you identify your financial need, compare loan products, determine which lender best suits your need and which lender offers the best deal.

Now you might be saying, “there’s no money available, lenders are not issuing credit to anyone right now”, yes there are still some cash flowing lenders out there. Traditional lenders might have tightened their reigns, however private lenders, local community banks and some third-party lenders are still in the business of lending money. Although we are currently in an economic downturn, they have not been inflected in such away as the traditional banking institutions, which allow these lenders to remain strong and more vital to the business community.

Did you know the Small Business Administration has loan programs designed to meet the financial needs of all aspects of the business industry ranging from $5,000 to Millions? There are six programs used widely to address these needs. The Community Express Loan, Patriots Express Loan, SBA Express Loan, and CAP Lines which is an umbrella of five additional programs (1. Seasonal Line of Credit, 2. Contract Loan Program, 3. Builders Line Program, 4. Small Asset Based Line (SABL), and 5. Standard Asset Based Line. Then there are the two most common loans 7a and 504.

I recommend contacting your local VDEC center and visiting the Jewish Free Loan Associations website www.jfla.org and Accion at www.accion.com, if you are in need of a small capital infusion- $15,000-$25,000 today.

As a business strategist for many years, working with small businesses and lenders, I’ve discovered faults and weaknesses of the lending industry, which has made the borrowing process for minorities and women challenging. In my new book “Where’s The Money? Accessing Capital”, outlines specifics about how and where to secure capital infusion for start-ups and existing businesses.

Visit my website to learn more about the Wade Institute http://www.wadeinstitute.org and my ebookstore for newly released books http://store.wadeinstitute.org

photo credit: tombothetominator

Do existing businesses need money? Probably.

Is this a time to start a business? Maybe.

In either case, the business plan you write today will be different than the one you wrote five years ago. Five years ago money was available. It is still there, but it is a lot harder to find, and to tie down. Here are the five keys to getting funding now:

1. Take it as far as you can yourself

Whether your business is is brick and mortar, or online, do as much as you can yourself. Bootstrapping is IN style, if indeed it ever went out of style. Getting funding to “expand” is always easier than getting funding to “start”.

Yes, this means more extensive planning and researching than you may have done previously.

Yes, this means developing prototypes and test marketing before spending millions on a project.

Yes, this means actually beginning the business if you can. Most businesses can start early. Most businesses can begin as an online business, a very inexpensive alternative to a brick and mortar business. A beauty salon would have a hard time, but a professional speaker, credit repair, and dozens of other businesses are naturals for online businesses. Even the beauty salon can begin online if it will have some unique products to sell. One lady I know began her business online, making custom mineral makeup. It was so successful that she never opened the boutique business she had planned. Now she fills orders from around the world every day. She discovered, too, that she didn’t even need a business plan – she had all the money she needed.

2. Be THE pro in the business

Nobody wants to finance your on the job training. Prove up front in your business plan that you’ve got industry experience and management success behind you. The “wanna be’s” are in for a rude awakening over the next few years.

Your business plan needs to tell the tales of your successes. Lists of “accomplishments” can get pretty boring. Translate those into real vignettes and it is a slam dunk. Don’t have the success stories to tell yet? Well, get them. Don’t expect funding until you’ve got the tales to tell.

3. Be The Dreamer

Capture your lender with your enthusiasm and sincerity. Swallow whatever fear and misgiving you may have, and march up to the lender, stick out your hand and say, “I’m Josephine Martinez, the entrepreneur down the street.” It doesn’t matter if that business isn’t open yet, you are still “the entrepreneur down the street”.

There is just something catchy about someone with such unbridled enthusiasm, especially in tough economic times. Your lender will want to capture your energy, and just may want to keep you around.

4. Be The Realist

Recognize that some businesses will be easier to fund than others. Repair businesses, credit businesses, low cost businesses will all be better off than a custom tailoring shop.

Highly capitalized businesses like restaurants, construction and resorts have a tough time presenting successful business plans in tough times. The tougher your business is to fund, the more important it is to do your homework. Don’t wait for your lender to tell you to do it, or even to vaguely ask for it. March in with your stats in your hand. It is the only way.

5. Go For It

This is the most important step. Lots of folks are sitting in the wings, waiting for the economy to change. Well, it is not going to change soon.

The US economy, and the world economy, are in the wringer like they haven’t been for half a century or more. Because of that, everyone assumes there is no money to be had. Well, it just ain’t so. There is money there, but few people know where to put their money so that it is both safe and making money. Your job is to prove that your business is the answer.

And there IS money out there. Lots of it. Honest. Go for it. Now.

MaryAnn Shank, the talented and rough weathered pro at Business Plan Master has helped thousands of businesses navigate tough economic times. Here is where her experience shines.

photo credit: HowdeeDoodat

As the economy continues to face credit challenges, small businesses, especially new, start-up companies are finding it even more difficult to find the capital they need to take their ideas and concepts and turn them into viable businesses.

Private equity firms and angel groups are no longer actively seeking new investments. They are more concerned with preserving and protecting their current portfolios. Further, private investors, like your neighbor or local doctors, accounts, lawyers, are not investing in local companies as their investments and retirement portfolios (usually the main source of their investment capital) have taken such large hits that any new investments are just out of the question.

Bootstrapping, by far the greatest source of capital for new businesses, is drying up fast. Credit card issuers and backers are pulling programs, tightening approvals and reducing limits. Friends and families are struggling just to survive themselves and do not have the disposable income to investment in your company.

Taking loans from retirement accounts are nearly impossible today as the market values of these assets have drop so dramatically over the last two quarters. There just isn’t the value there to take a loan against.

SBA backed loans remain just a difficult and costly to obtain as always. These loans still need to be underwritten by traditional lenders who are not making any loans at all as well as be underwritten by the SBA who has followed the banks’ course in tightening standards.

So, what are new, small businesses to do?

A few suggestions are as follows:

First, start smaller and work your way up. Small scale operations mean smaller capital needs. Thus, the small amount of capital a new entrepreneur does have (savings, home equity, retirement plans) can be used to jump start a business if it is designed on a smaller scale.

Micro-Loans: Micro-loans are loans for small organizations or start-up companies that do not qualify for regular loan facilities. These loans usually range from $500 to $25,000 and take up to five weeks for approval and funding.

Personal Loans: There are still a few companies that make personal loans from $10,000 to $100,000 provided the borrower has excellent (and I mean excellent) credit and a demonstrated ability to make the loan payments.

Asset Based Facilities: If your business has some proven track record, even if it is just for a few months, and has generated some financial assets like accounts receivables or credit card receipts, you may qualify for capital against those assets.

Account Receivable Factoring can help speed up your cash flow while you wait for your customers to pay you. You can then access working capital that can be used to generate new business, cover current liabilities obligations, or make payroll. There are companies that will factor receivables as low as $200.

Included with Accounts Receivable Factoring is Purchase Order Financing. If your business has an order to be filled but does not have the money to complete the order (e.g. buy supplies or equipment or hire needed labor) Purchase Order financiers will provide the funds needed based on that order.

Business Cash Advances, while not really a loan, can provide working capital against FUTURE credit card sales. The funds can be use for any purpose and could provide the capital your business needs to get it through these troubled times.

Equipment: Do you own some equipment outright? If so, you can sale that equipment (including tools and machinery) to a leasing company. Then, lease the equipment back from the lessor. You get the cash you need now and still benefit from possible tax deductions of the lease payments and other costs.

Where there is a will, there is always a way. These may not be the cheapest financial products in the market but for most business owners and start-ups, these may be the only option.

When seeking capital in this market, try to keep in mind that it is only temporary. The markets will turn around and lending standard will loosen. So, what you seek now should only suffice enough to get your new, start-up business through this down period.

Joseph Lizio holds a MBA in Finance and is founder and owner of http://www.businessmoneytoday.com. Also, visit his blog at http://businessmoneytoday.blogspot.com/

BusinessMoneyToday.com is a single portal in which business owners can easily find and obtain non-traditional financing for their business. YOU search for the products YOU need and select the lender or financial provider YOU want to work with. Remember, BusinessMoneyToday.com only works with money providers who WANT TO WORK WITH YOU!

photo credit: zhushmanson

Starting a small business has proven to be on e of the best ways to build wealth in America. Over 90% of all millionaires are small business owners. Taking the first step towards financial freedom is the most important thing you can do.

Now, financing your business venture can prove to be more difficult than many imagine. The good news is that there are thousands of grant programs available to people looking to start or expand a small business.

Many grant websites out there would like us to believe that it’s as easy as locating an obscure federal grant program and then sending them a letter and wait for the check in the mail. Furthermore, they’ll charge $59 for this info and provide no guidance on how to apply for the grant. It is important to realize:

(i) It is NOT that easy to get free money from the government
(ii)…but it IS absolutely possible, with a little research & work, to get truly free money from the government (or any one of several private foundations).

Now, most US government grants for businesses are targeted at larger corporations or non-profits organizations, particularly those specializing in education or medicine. The best-bet for getting money for a small-business is from private organizations and state agencies.

The process of finding a small business grant program to apply for and reviewing the requirements to getting is very time consuming. After conducting a two-week search for a medical publisher, I found the requirements to be very specific and difficult to meet.

Eligibility can be based on your location, and your business’ sales revenue to the application date, years in business, sex, race, and even for the purpose of funding. If your business sets out on a small business grant seeking mission there are some questions that you will have to answer which are:

1. Do you have the time and the resources available so that you can search for a small business grant program and apply for it?

2. Can you afford to hire a consultant if you are unsure of how to do it, or can you learn the grant application process by yourself?

3. Does your business need the money right now for expansion or can you wait up to a year?

If you want to take a look at the small business grants available, the best place to start is the Catalog of Federal Domestic Assistance (CFDA). The CFDA lists thousands of grants from all government agencies for free. Many business grants will be geared towards minority business development or rural business opportunity grants. Do not overlook the other assistance programs available such as equipment and training.

When you do locate a small business program, you will need to be ready to go through the, approval process. Most beginners spend too much time searching for a grant program then not enough time preparing and writing the grant application. This is crucial to your success as getting grant money. Our goal is to help people spend less time finding grants and providing them with a detailed approach to preparing a successful grant application.

Here are some tips:

Small Business Grant Tips

- Provide the grant company with all of your complete and accurate information in the application. An incomplete application will likely not make the review process or it can add delay your grant form getting approved.

- Get to know your grant officer and their constraints, budget and concerns with approving your grant.

- Stand out among the crowd with a well-prepared business plan if required. You will have to demonstrate your understanding of the business. Show how the money will bring the benefit the government agency wants.

If you find that you are willing to go through the steps that will be needed in order for you to get your grant, then this will be your comprehensive guide to making it happen. Visit our website for some free resources such as state funding agencies and more grant writing resources.

Two years ago I went through the agonizing process of getting a grant to buy a local business. A lot of Grant sites out there will charge you $50+ for the info in this article… There are a couple of things to remember when shopping for a grant program. Let this article point you in the right direction and read more at http://www.OfficialGovernmentGrants.com

photo credit: Theodore Scott

Many say that now may not be the best time to deal with the Spanish market. Property, once one of the most intriguing aspects of Spain, has now become overcrowded and overpriced. But on the other hand, investing in businesses there has started to let its potential shine.

There are thousands of new businesses, entrepreneurs, and small businesses looking to expand in Spain. They can now use networks such as the Angel Investment Network to connect to investors in Spain, around Europe and in some cases globally. Over the past few years, several local networks of business angels have also cropped up, such as CIDEM/XIP.

Having become one of the top ten economies in the world, Spain has begun to attract significant amounts of investment from foreigners. The growth has remained steady over the past ten to fifteen years, convincing investors that new businesses here have the potential for a very profitable turnover. However, when angel investors invest in new businesses, they want to make sure they cover a variety of market and industry sectors, as opposed to the real estate market where certain aspects have become oversaturated, causing the property bubble to burst.

Many Spanish companies have expanded internationally over the past ten to twenty years, and new businesses are looking across borders for potential capital investment. This also works the other way around, with many foreigners moving to Spain to start a new business.

Contrary to some other parts of Europe, most business angels in Spain do not get too involved with the overall running of the business, making it less of an overall partnership, but there are still many intangibles such people can provide. However, most investors will have the benefit of experience of the market sector, solid knowledge of how start-ups are structured, and possibly access to contacts around the world.

To help connect both parties, the Angel Investment Network has set up a branch in Spain. With this, both entrepreneurs and investors can find the right kind of partnership online. The Spanish website already has thousands of registered entrepreneurs listing their products and business ideas, along with business angels from all over the world who are interested in making an investment in the Spanish market, with experience in all sorts of industries.

Mike Lebus works with entrepreneurs seeking investments, via the Investment Network in Spain, which is part of a worldwide network of websites that help angel investors connect to entrepreneurs around the worl

photo credit: Marcin Wichary

Where, oh where, has that business grant gone? Everyone talks about them. Few seem able to actually find them.

Some, in fact, claim that business grants are everywhere; some claim they are as rare as a trout tooth. The truth, dear Watson, lies somewhere in between.

“Business grants are there for the asking!”

If you have done so much as a single search for “business grants”, you have most certainly discovered those web sites that proclaim, “They’re here — in my directory. Satisfaction guaranteed, m’am.”

Yeesh. I can hear the carnival hawker in the echo.

And it’s not just one site that makes such claims. No, hundreds of sites that make this claim. One gives your money back if you send in a reject letter from an agency you applied to; another says you are buying “soft goods” that can’t be returned. No matter. It’s all the same pitch.

“Good luck, Buddy. Business grants just aren’t there!”

When I found one site that claimed that business grants are a fantasy, it was actually a relief. Wow, an honest person.

Well, this person may have been honest, but she hasn’t done her homework.

“There are business grants to be had.” (This is my voice)

They are not growing on trees, but they are there. Consider, for instance, these scenarios:

Scenario No. 1 — Local Interest Grants

An experienced pre-school teacher sees a tremendous need to provide pre-school care for children in a low income area so their parents can go to work in a new plant being built nearby. Where can she go to get a grant to start her business?

Answer: The U.S. Dept. of Education is a good bet. The local county or state government might have money available, too. Even the new company being built might chip in with space and supplies. (If the pre-school expands, and becomes very successful, and even lucrative, it can still open more branches, franchise, or expand. In short, it, too, can still be profitable.)

Scenario No. 2 — Scientific Grants

A brilliant scientist wants to team up with a university, use their Ph.D. fellows to do research, and pin down the gene for one particular type of cancer. She has good credentials and high hopes. Where can she get a grant to start her company?

Answer: The U.S. National Science Foundation may indeed have something. (If the company proceeds to make this discovery, it is still able to sell stock, take in investors, or sell the patents. In short, it can still be profitable.)

Scenario No. 3 — Emergency Grants

A second generation Indonesian entrepreneur sees the devastation in her homeland caused by a tsunami. With her business contacts and experience, she knows she can help re-build her country. Where does she go for a grant?

Answer: USAID probably has $20 million or so on hand for just such a project. In fact, as I write this, that is exactly the situation. (This is not a “profit making” venture. However, somewhere in the $20 million grant, she will of course pay herself, and will be able to lay a strong foundation for a future business.)

So, Can I Reach Out And Pick One Off A Tree?

Are these three examples just aberrations? Emphatically, NO — there are thousands and thousands more where these came from. It’s all a matter of knowing where to look.

And it is a matter of being creative. Rarely can a person simply raise her hand, say, “Here I am, ready to take your money!” The bigger the grant, the more creative the approach needs to be, and the more experience the businessperson needs to have. But the money is there, waiting for creative, experienced entrepreneurs to claim it.

MaryAnn Shank, the founder of Business Plan Master has helped thousands of entrepreneurs find just the right financing for their businesses, whether from grants, from the SBA, from angel investors or alternative financing. For decades she has been a recognized expert in business plan development. Her knowledge is there for the taking.

photo credit: David Boyle in DC

We’ve all seen the hype: “We’ll put your plan in front of thousands of investors!” “We’ll write you an award-winning online business plan!” “Only $3,000 for thousands of investors to learn about your company!”

I cringe every time I see one of these ads. Vultures are preying on honest business people who want to fund their businesses. Here are some ways to spot them:

1. “Only qualified investors see your business plan.” Yeah, sure. And who “qualifies” them? Have a friend try to sign up as an investor (that part is usually free). How is she “qualified”? Is there a background check? Does she submit a financial statement? Odds are that she will be asked to do nothing more than sign a statement that she has a certain net worth. That’s no “qualification” in my book. So who are these “investors”? Who knows. One could be your strongest competitor.

2. “You approve anyone who sees your business plan.” Okay. So what are you going to do to qualify the potential investor? Are you going to run a background check? ask for ID? ask for tax returns? or just be so happy that anyone wants to see your business plan that you jump on the idea? (That’s how these scams get away with charging thousands of dollars — too many entrepreneurs are desperate for funding.)

3. “It’s only $500 (or $300 or $100) to register.” What does it matter if it’s free? If it is diverting your time and energy and resources away from finding a viable investor, it’s not worth it.

4. “Your idea is great, but we need to put it into our format. This will only cost $800.” Don’t walk — run from these guys.

5. “Your idea is so great that we want to invest $2,000 in it.” (That’s after you spend $5,000 to put it into “their” system.) Do I really need to comment on this?

6. “Talk with a satisfied customer, or 2 or 3.” Here’s this entrepreneur who just got $2 million in funding, and he has nothing better to do than sell the web scam to you? Trust me, entrepreneurs who just get funded barely have time to eat, let alone talk.

7. “Look at all these written testimonials.” This is harder to disprove because the testimonials look so real — even the companies might be real. But unless the testimonials, and the companies, can be verified independently, I wouldn’t trust them. And I’ll lay odds that they cannot be verified independently.

There is one huge exception to this: ACE-Net (http://activecapital.org). This is more properly the Access to Capital Electronic Network run by venture capitalists, institutional investors and individual accredited investors. It was developed by the U.S. Small Business Administration’s Office of Advocacy to encourage the creation of a national marketplace for investors to find and invest in equity offers by small companies.

ACE-Net isn’t for all companies. Those seeking under $1 million will probably find the paperwork daunting. Those seeking over $5 million won’t qualify. There are special qualifications, and of course lots of forms to fill out — but nothing like the forms required for a formal initial public offering.

But for those who do qualify, it’s an amazing tool in raising financing. Spend some time with the website and the forms, and see if your local SBA office can put you in touch with another company that went through the process.

As with any investor tool, don’t rely exclusively on ACE-Net. Use it in conjunction with your personally developed targeted funding search. This, combined with an exceptional business plan, doesn’t guarantee success but it places your company head and shoulders above all the rest.

MaryAnn Shank

http://www.businessplanmaster.com/investors.html; http://businessplanmaster.blogspot.com

Ms. Shank is a seasoned business financing specialist.

photo credit: sunciti_sundaram

Question:

I’m an entrepreneur and have finished my business plan. I’m getting ready to raise $2 million for my startup real estate company – but a friend of mine said I should only talk to accredited investors. I’m not exactly sure what an accredited investor is and I don’t understand why I can’t talk to anybody I want to about investing in my company?

Answer:

The term, accredited investors, has to do with securities laws – both federal and state – and making sure you comply with the very onerous restrictions that go with the fundraising for your start up company. I’ll give you both the short and long answer to what an accredited investor is in a minute. But the first thing you need to know is that if you raising capital from angel (AKA private) investors, you will almost certainly need more than just a business plan. You need what’s known as a Reg D Private Placement Memorandum – PPM – in order to comply with federal and state securities laws.

If you plan on pitching your deal JUST to traditional venture capital, you do not need a PPM. However, well over 95% of start up companies are too small, too embryonic, to hit the threshold funding levels, growth levels and potential market caps to attract VC funding. Hence, over 95% of start up companies will seek their funding from private investors. Hence, over 95% will need a Reg D PPM.

Reg D is a securities law exemption for private placements that allows companies to raise investor funds without all the costly and overwhelmingly onerous legal and accounting requirements of a public offering of stock. To qualify for the Reg D exemption, you have to follow very stringent rules. One is having the PPM. Another is not soliciting the general public (this is a biggie.) Another is only pitching the deal to those investors who can really afford to take the risk and lose their money. Hence, they need to be accredited. It actually gets more complicated in that you can usually offer your deal to up to 35 unaccredited investors with most offerings, depending on how they are structured – but trust me when I say that you are better off sticking with the more sophisticated accredited investors.

If you want more detail on it, check out my web site – there you can see why you want to do this, some of the onerous penalties for not doing this (e.g. possible but not probable jail time), and the full listing of Reg D I got from the SEC. Also, from that same page, you can jump to the definition of an accredited investor.

Bonus: For more on funding documents, business plans, articles, tips and tools for entrepreneurs and start up company CEOs, you’re invited to visit my blog and web sites…and ask your own questions. While there, I invite you to download both a sample comprehensive business plan and a complete Reg D private placement memorandum (PPM) for FREE…

http://www.ShouldYouStartACompanyToday.com <~~~ The Blog + Free Sample Business Plan / PPM / Audio / More…

http://www.Virtual-Exec.com <~~~ Virtual Executive Mentoring and Consulting Services

Robert Lee Goodman, MBA, Ceo & Chief Dragon Slayer.