Fundraising Assistance

The first, and most important decision to make is which type of fundraising to pursue

Debt

    • Maintain complete control of the business
    • Requires collateral or may require personal guarantee
    • Personal credit does impact the types of loans available to you
    • Time in business impacts the types of loans available to you
    • Use of funds dictated in the terms
    • Duration can be as short as a few months to up to 7 years
    • Generally lower return on investment (interest rate)

There is no absolute right or wrong answer to this choice. In fact, many companies choose to have a mix of both.  Debt financing tends to be more common with most small businesses given many small business loans are government subsidized making them generally quicker and easier to obtain

Equity

  •  Shared control of the business
  • Requires a valuation, which can be time consuming
  • Requires additional legal services and fees
  • Size of the raise impacts the class of investors
  • Requires a due diligence process, which can be very time consuming
  • Requires a formalized reporting system
  • Return on investment expectations are typically higher and faster

Examples of Debt Financing Options

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SBA Loans & Lines of Credit (LOC)

An SBA loan is the holy grail of small business loans because it provides the most favorable terms to small business. An SBA loan is the holy grail of small business loans because it provides the most favorable terms to small business. They usually provide the lowest interest rates and longest payback terms

Types of SBA Loans

While SBA loans offer the most favorable terms there also have a longer list of requirements and can take some time. SBA loans come in four major types:
- Microloans: $10K up to $50K
- Community advantage: $50K up to $250K
- 7(a): $50K up to $5M
- 504: up to $5.5M

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Commercial Term Loans & LOC

Commercial banks also offer loans, which are faster to obtain than standard SBA backed loans. The trade-off is the interest rate tends to be higher (not subsidized) and the payback period tends to be much shorter along the lines of 3-5 years

Community Development & Credit Unions

These generally are geared toward certain communities, some of which are quite broad. Like commercial banks, these tend to be quicker. Typically, they may offer lower interest rates depending on circumstances. However, the do tend to have upper limits to the size of the loan they can offer.
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Alternative Lenders

Alternative lenders have most relaxed lending requirements, and they tend to be the go-to lender of choice if denied an SBA or commercial loan. They are fast and provide funds quickly. They do, however, come with fees and high interest rates, which is the price paid for laxer eligibility requirements

Peer to Peer Lending

This is another alternative lending source, which is based on crowd sourcing and shared risk. They tend to have lower limits on the amount that can be raised. However, they offer a wide range of interest rates and varying degrees of eligibility criteria. They are worth exploring if and when you have been denied funding by a more traditional route.
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Examples of Equity Financing Options

Seed

Seed capital is typically from founders, friends, partners, and family. Some seed money can come from grants or other sources like incubator programs and the like. Seed money usually comes with few string attached though some will be executed as convertible notes.

Seed

Seed funding tends to be smaller dollar amounts in $10 - $100K range. Seed funding is generally used for patent applications, prototyping, and other early start-up activities
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Angel

Angel investors typically engage after the initial proof of concept is complete. Typically, you need to have a workable prototype and some customer base. Angel investors are usually short term and typically invest via a convertible note.

Angel

Angel funding tends to be slightly larger $100K to up to $1 Million range. It is not uncommon for several angel groups to work together during this period. Angel funding is typically used for later stage development. They will also likely require special protection provisions as part of the deal.
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Series A

This is the first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors. It is usually the first series of stock after the common stock and common stock options issued to seed and angel investors

Series A

Series A investors typically purchase 10% to 30% of the company, which tends to range in $2 - $10M range. The capital raised during a series A is usually intended to capitalize the company for 6 months to 2 years as it prepare for a full launch, expansion, etc.
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It is important to note that neither of these lists are exhaustive. They are intended to provide background on some of the more common forms of financing available. Each business has a unique set of circumstances, which need to be considered before deciding which is best for them.  We would be happy to walk you through all of your available options.