Monday, April 13, 2009

Some more thoughts on getting money.

If you cannot get money from your bank and the amount you need is just to small for the big guys like General Electric Capital, Barclay's Capital, ITT, etc., then you might consider one of the following:
1. Borrow the money from yourself. Yes, borrow, do not give. However, if you do this write up a note with an interest rate that is competitive with current rates and make payments. If you get into trouble and cannot pay, then don't. I have written into clients notes the provision that the client can be late a certain amount of times per year. If you really get into trouble, you can write off the note, It is very hard to write off un-documented "loans" so do it right!
2. What about relatives. Not unless you ABSOLUTELY have to. Then if you do, remember to document the loan with a note and lien (if applicable) and make payments. Do NOT take your relatives last dime. If they can afford to loose it all, okay. Otherwise, it is not worth. Honest. I have been there and done that and it is very difficult.
3. Take on a partner or sell stock. Certainly if you have a family owned business, do this as a last resort and NEVER, I SAID NEVER, give up a controlling interest. Go out of business first. Now having said that, if you have already given up control or there are many shareholders already, then go ahead. You just have to remember that when you give up controlling interest you give up your right to do whatever you want and you can be called into scrutiny for your actions as the CEO, President, etc. If you just own a sole proprietorship, then taking on a Partner can be a real pain or a real benefit depending on the how well you work with others after having to not "report to" or get opinions from anyone else. It can be really tough, so be careful You may have to do it if all else fails.
4. Sell the business. In today's market that is tough because everyone is expecting to get a bargain and even if your business has been steady or good but needs to grow, the bottom fishers are out in droves. Be careful. The other side of the coin is that if you can find someone who really wants to buy and you do not care to keep the company (especially if you do not have any heirs), then sell out, quit or close up shop and work again for someone else or retire.
5. Lastly, go to a Venture Capitalist. They all talk like they are here to save the day. Few, if any, of them are. If they like your business, then be prepared to give up 60-90% even if their adds say "keep majority ownership, we want to be minority partners". That is not true. After reviewing your business, they will tell you how bad it is and why they need to own it all. If they say that, hold your ground because if it is good enough for them to want to do for a large ownership position, they see something worth keeping. So should you!

Call me if I can help! What do you think?

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