When it Comes to Business Funding, It's not What You Know It's Who You Know

To improve ones chance of becoming a successful business owner whether operation is a major organization or a small company, one must first ask -- how can I fund the operation successfully? It is obvious that businesses create cash flow, and when managed well, the cash flow will usually keep businesses operating well. However, there are the times like starting a new business, expanding or experiencing a revenue shortfall, when every business will require an outside capital infusion. Solutions come in two varieties, planned and unplanned. It is by far better to have an organized plan.

For the start-up business, rarely will a person succeed if he or she cannot find the needed capital to open its doors to the public, and maintain an existence while the company's product or service gets known. Therefore, it is imperative to get the all needed startup capital. One of the main reasons people do not get startup capital is due to lack of resources. Few people realize most start-up businesses (over 90%) are funded by private investors (also known as angels). What compounds this problem is the fact that most people have spent much time around persons in about the same income bracket as themselves. It is just true; most people know very few wealthy people and even fewer financiers. Therefore, when he or she sets out to become a business owner, the resounding question of 'where do I find the money' gets asked and more times than not, the would-be entrepreneur is at a dead end. Occasionally, the person seeking to start a business will go to the banks. Yet unfortunately, the information we get about banks and their willingness to fund small business is too often misinformation. For example, fewer than three percent of startup businesses are funded by banks regardless of ones FICO score and the meritorious nature of the business. So, having minimal knowledge about funding, coupled with a deficiency of friends, financiers and associates with disposable capital is the brick-wall that is insurmountable for most business people wishing to startup a company. We will show the reader solutions later in this article.

But let us address the expansion business first. The expansion business has a little better luck with banks due to having some cash flow and financial history. However, this segment of businesses has just slightly better success in getting bank funds than startups as banks normally require collateral value in excess of the cash value to consider a business loan request. Therefore, having an organized plan of attaining capital is still off-the-table. For the vast majority of expansion stage businesses, it is still guess work whether or not they can get the capital to expand.

Finally, when a company is experiencing a shortfall of capital, which commonly happens to strong companies, it seems the occurrence happens right about the time the company is growing and actually experiencing success. Yet, growth means hiring, training, product development and so-forth. Thus, capital shortfall at this stage is in many cases a death sentence.

So, what to do?The real truth is found in the old proverbial "it's not what you know it's who you know". There is another concept that is self evidencing; it never hurts a company to know a few millionaires. This applies whether you fall into any phase or stage of business or industry. Having wealthy people surround you can never be superfluous, you just can't have too many millionaires around if you run a business. Don't beat yourself up if you like so many have failed to acquaint yourself with wealth, just don't put it off any longer. If you are doing something in business, or thinking of doing something in business, you have the perfect opening to meet wealthy people, and perhaps have them invest with you. Joining your local Chamber of Commerce for example, business clubs, networking services like Linkedin or Meetup.com will give you plenty of networking opportunities and possible investor referrals. Further, there are small business development centers (SBDCs) around the country that provide investor referral services along with other consulting services for small and start up businesses at no cost. Finally, there are many investor leads companies that survey investors and have databases of accredited investor leads that like private investment opportunities. Just remember, there are millions of active semi-philanthropic investors and they are waiting to hear from small business owners like you. The catch is -- they can't fund you if they can't find you!

BreadStreet Author: SJ Fortenberry

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