THOUGHTS ON FINANCING YOUR PRIVATE COMPANY
The more you invest yourself, the easier you get financing
If you have plenty of assets, you just walk into a bank and ask them to lend you the money you need (debt financing). As long as these assets are marketable, getting the loan won’t be too difficult. However, there are alternatives, e.g. private investors or investment companies, providing equity or debt financing.
It goes without saying that you will need a business plan. In the event of a start-up this plan may be rather rudimentary, but you still need one. Getting capital for your business is not the same as applying for a mortgage. You need to convince investors, and without them believing in you and your team there will be no money.
How to convince investors? You must be able to show that you stand out of the pack, that the market actually needs your products or services and why you and your team are excellent in achieving your goals, and thus are better qualified than the competition.
Except from determining your financial needs, ask yourself what you have to offer. How much of your own money and that of your family and friends will be put in your business? If you don’t want to take any risk yourself, don’t expect others to do that for you. The more you have invested in your business, the easier it is to attract financing.
Do you have assets to pledge? Do you need short-term cash or a long-term investment? Do you want the investors to be involved in the day-to-day operation of your business? What will the exit strategy be?
Finally, make sure the necessary documentation is prepared or at least reviewed by your attorney. And … don’t forget to manage the so much desired financing once you got it. Keep on defining your needs and keep on looking for better alternatives.
Karel Frielink
Attorney (lawyer) / Partner
