How can I raise capital for my business?€¦ · Your options to raise equity may include wealthy...

GFS Financial Advisors, LLC.Donald A. GaladeCEO15 N. Beisels Rd.Drums, PA [email protected]

How can I raise capital formy business?

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How can I raise capital for my business?Answer:The two general categories of financing available for businesses are debt and equity. Debt requires repayment of a loan. Equityinvolves raising capital by selling parts of the business to investors.

How much money your business needs, how the financing will be used (start-up, expansion, new development), as well as howyour business is organized, its size, and its stage in the business life cycle (start-up, growth, or mature phase) are just a few of thethings that may influence your efforts to raise capital.

If yours is a new business without a track record, you may have difficulty raising capital from lenders or investors. A first place tolook for capital might be your own assets. You may be able to raise money for the business from your savings or borrow against aretirement plan, life insurance policy, credit card, or the equity in your home.

If your business is more established, you may be able to borrow from a number of sources. You can apply to banks or creditunions for loans. You can contact the Small Business Administration for information on the programs it administers to helpbusinesses obtain financing. Your local chamber of commerce may be able to put you in touch with state and local agencies thatprovide financial assistance to new businesses located within your geographic area. You need to have a detailed business plan toprovide to potential lenders or investors.

Your options to raise equity may include wealthy private investors known as angels, venture capital firms, private placement ofequity, and investment clubs. Small business investment companies may act as lenders or investors. For some corporations, aninitial public offering is used to generate large sums of cash through the sale of company stock. A potential drawback of equityfinancing is that investors may expect to exercise some control in the running of the business.

Some creative entrepreneurs can now use the Internet to raise money. The Jumpstart Our Business Startups Act of 2012 directedthe Securities and Exchange Commission (SEC) to create rules that would allow entrepreneurs to raise money throughcrowdfunding without running afoul of existing securities issuance laws. The final rules took effect on May 16, 2016."RegulationCrowdfunding," as it's now known, puts the following rules in place:

• A small company can raise up to $1 million over a 12-month period through crowdfunding. (Some exceptions apply.)• Individual investors can invest certain amounts over a 12-month period across all crowdfunding offerings based on their

annual income and asset levels. Investors whose annual income or net worth is less than $100,000 can invest the greater of$2,000 or 5% of the lesser of their annual income or net worth. Investors whose annual income and net worth are both atleast $100,000 may invest up to 10% of the lesser of their annual income or net worth.

• No more than an aggregate of $100,000 in equity crowdfunding offerings may be sold to an investor in a 12-month period.• Securities generally cannot be resold for at least one year.

In addition, small businesses will be required to provide certain information to the SEC, potential investors, and the crowdfundingplatforms facilitating the transactions. Among other details, this information includes:

• The price of the securities or the method of determining the price• The target offering amount, the fundraising deadline, and whether the company will accept investments exceeding the target

amount• Financial statements that may need to be accompanied by the company's tax returns and reviewed by an independent public

accountant or audited by an independent auditor (Note: For companies offering securities for the first time, reviewedstatements will meet the regulations)

• A description of the business and how the crowdfunding proceeds will be used• Information about company officers, directors, and 20% or more owners

Moreover, crowdfunding companies will have to file an annual report with the SEC and provide it to investors.

Companies that will serve as funding portals have their own set of regulations to follow. Among them are the requirements to takecertain measures to reduce fraud risk, to make crowdfunding company information available on their websites, and to providecommunication channels that allow discussion about platform offerings.

Finally, before making any investment commitment, an investor must acknowledge that he or she has reviewed the fundingportal's educational materials, understands that the entire amount of his or her investment may be lost and is in a financialcondition to bear the loss of the investment, and has completed a questionnaire demonstrating an understanding of the risks ofany potential investment and other required statutory elements.


There are also internal business sources for raising business capital. Consider offering incentives to your customers for early cashpayment (such as a discount) to accelerate your collections and free up operating cash. You may choose to lease companyassets rather than buy them. Finally, your company may be able to negotiate special delayed-payment terms with suppliers orfactor accounts receivable, which entails getting an advance on money owed to you.


GFS Financial Advisors, LLC.Donald A. Galade

CEO15 N. Beisels Rd.Drums, PA 18222

[email protected]

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2017

IMPORTANT DISCLOSURES

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legaladvice. The information presented here is not specific to any individual's personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, andcannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.Each taxpayer should seek independent advice from a tax and legal professional based on his orher individual circumstances.These materials are provided for general information and educational purposes based upon publiclyavailable information from sources believed to be reliable—we cannot assure the accuracy orcompleteness of these materials. The information in these materials may change at any time andwithout notice.

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