In this week’s capital raising segment, we’re asking the question: How are you going to raise the capital your business needs? We’re coming out of a pandemic. There’s been worldwide disruption. If you’re still around, you likely need capital. Now, capital is more than just equity capital… capital is also debt. So when you first address the capital question, you need to focus first on how much debt you can raise, because debt is always in the end cheaper than equity, although it comes with more personal risks. Then the difference between the debt you can raise and the equity that you need would be how much equity you need to raise.
On the debt side, for small business owners, today is a really good day to be approaching the SBA to borrow money. They’ve been very well funded by several of the last few rescue plans going back, not just PPP loans, but several of my clients have gotten straight up SBA loans, even SBA express loans. These are not gonna be forgiven–they’re loans–but they could go up to $1 million. Some of them go up to $10 million. Some of them you can buy company real estate and others you can’t. There are many SBA options, which we encourage you to explore if that fits your business.
Frankly, how you raise capital really begins, first and foremost, with what business you’re in. Are you raising it for real estate that you want to develop? Well, SBA is not an option for you then. Bank debt may be an option, but you’re still going to need some equity capital.
If we get onto the equity side, there’s “bootstrapping,” maximizing out your credit cards, asking friends and family, crowd-funding (which is a much more viable option than it was even 1-5 years ago), etc. There are angel investors… they may be easy to work with, but they want big returns. Of course, there’s venture capital and private equity, and then there’s a traditional capital raise where you figuratively go door-to-door and ask people to invest in your company. That’s a very technical area because you need to be mindful of accredited investors and exempt offerings that you can do. A raise is going to be one of the toughest things that you’ve ever done in your entire business life. It’s the sales job that you’ve never done before. Asking investors to essentially come partner with you and go on your journey with their money is a challenging thing. There are best practices, but still, even if you’re the best pitcher in the world, you’re going to get a lot of “no’s.” You’re going to need the thickest skin you’ve ever had.
These are things that we help our clients with. There are a couple of great articles here from Empire Flippers, Exit Promise, and Entrepreneur here for you to review a well. If we can help you with anything related to this topic, note that we are not placement agents and not attorneys, but we do help companies structure their raise and, in appropriate circumstances, will help them address their investors and ask for equity capital as well. If we can help you with that, please let us know!