2.7 KiB
2.7 KiB
Section 13 | Lesson 75 - financing alternatives
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- notes
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