#+title: Section 13 | Lesson 75 - financing alternatives
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* Links
- [[./../mba-main.org][TOC | Business]]
- [[https://www.udemy.com/course/an-entire-mba-in-1-courseaward-winning-business-school-prof/learn/lecture/4284470#overview][S14:L75 course video]]

* notes

the company is mature
but it is not growing

** financing alternatives
- equity investors are better for startups
- if you are in debt and miss a payment, it is death
- if you must take debt, do it as an LLC so they can't come after you

*** additional sources
- raising money is tough
- do not pay upfront fees to consultants to raise money
  - they are fraudulant
- you pay people AFTER THEY EARN THE CASH

** commercial & venture bank lending
- commerical loans are possible with a few years of operating history
- they want to see cash flow projections based on a few years of history

*** don't really care about assets
- unless you are extremely liquid

** VC vs Debt firms
- VC love risk
- Debt firms hate risk
  - interest on debt
  - warrants on stock options

*** equity
- primary for venture capital
- secondary for debt firms

*** timing
- beginning venture capital
- ending debt firm

** reasons not to do debt financing
- minimum 2+ years financials
- few tangible assets
- low revenue (tech)
  - tech firms always have this problem
- 1-2 employees are too valuable

** credit card debt
- 50% of startups use this
- if your CR rating sucks you can't raise debt

** foreign investor funding
- US gov lets you buy lawful permanent resident status if you invest $1mn in a startup and create or preserve 10+ jobs
- minimum drops to 500k if in a rural or high unemployment region

** government loans
- native americans
- hawaiians
- women
- veterans

** vendor financing
- "2/10 net 30"

*** how it works
- you buy goods on credit from a vendor
- if you pay back before 10 days, you get discounted 2%
- if you pay back between 10-30 days you pay the full amount

- so always pay before the 10 days, because then you avoid an effective compound rate of over 40%

*** example
- you have a buyer lined up for 1000$ worth of goods, assume he pays you upfront
- vender hands you goods, you pay vender $980 immediately due to 2% discount under 10 days
- hand over goods to buyer
- pocket 20$

** vendor leasing
- you lease equipment instead of a money loan
-  part of payment is in warrants

** other financing
- morgage if company owns the business
- direct public offerings
  - you can get a loan of up to $1mn through a syndicate of many investors

** bootstrapping
- pay for it yourself
- better to use Other People's Money
- set up LLC so protect family