Capital Archives - GUJRAT INDIA

Ways to Finance Your Dream Business: Different Capital Mix to Start Your Business

If you have a business idea, or you think your true calling is to walk an entrepreneurial path, but you are more than broke to start your own business, the only way to make that dream come true is to loan a capital to finance your dream business. Yes, you may have different sources to ask for a business loan. But all are different. Some may not even allow you to loan.

Here, we list down some sources you may ask a loan from and their qualifications so you can trim down your prospect.

Equity Investment

Equity means ownership. Hence, those who have built their businesses are the ones only allowed in this form of loan. If you opt for equity investment, you should be ready to let part of your start up go. Because, once you sell 51 percent of your shares, you lose control of the company. This kind of loan is the same putting a ‘business for sale’ sign on your business.

However, if you’re the kind of owner who likes full command on your business, you may just take a loan from other companies in your business-if you happen to have one. Or loan from your friends, business partners, stockholders or other people you trust and create an agreement with them instead. That would be legal as long as you have mutual agreement with these people. Also, before you indulge in this kind of loan, be sure to know the law to protect yourself.

Personal Savings

Personal Savings is the most common form of equity investment. This means that the fund that you’ll likely get to start your business is through personal savings, inheritance, friends and family. This kind of investment is what most of the people resort to when starting their own business. And it is actually a good thing for investors and money lenders as it signifies that you’re highly committed to the business because you’re willing to risk your personal savings.

In the course of your business, it is advisable to keep your personal investment to at least 25% to increase an equity position and leverage. Remember, the more equity your business has, the more attractive your business is to banks that can loan you as much as three times your business’ equity.

Commercial Loans

This accounts for the second most used form of business owners to finance their companies. According to Business Week, small business loans are declined by 18 percent due to financial crisis. Although this doesn’t mean that your loan would be disapproved because commercial loans are case to case basis. And the only way for your loan to be approved is to abide to the 4 C’s of Lending. Here they are:

Cash Flow: It is the amount of money going around your business or your liquid assets. When applying for a loan, you need to strengthen your cash flow as this signals that you’re able to repay the cash you’re borrowing.

Collateral: It is the value of asset you’re willing to pledge as security for repayment of your loan. This is to assure the lender of your commitment to pay because if nay, the collateral will be forfeited in the event of a default.

Commitment: This is the amount of money that you’re committing to your business. However, this is not as important as the other two aforementioned as your loan can still be approved without disclosing your share.

Character: This covers your personal credit score and history with the financial institution as a whole. This is the very thing that you need to look at if you’re planning to loan. All your debts no matter how small it is should be cleared and you should maintain a good credit rating to increase your chances significantly.

Indeed, there are different institutions to which you can apply for a loan. It all depends on how creative you are on designing your capital mix to get started with your dream business.

Invest $100 Dollars and Grow Enough Seed Capital to Start Your Own Business

Do you have ideas for a business you want to start but do not have the seed capital it takes to get your business idea off the ground? Are you tired of being turned down for small business loans because of your credit or financial status? There is a way you can grow enough seed capital to start your own business and even build a substantial income. If a sixteen-year-old can do it with his lawnmower in one month, then so can you!

One summer day I observed my neighbor’s teenage son as he went door to door with his lawnmower offering to cut grass in our neighborhood. I asked him how many lawns he had cut that week and he said four and needed two more to make $120 dollars. I admired the young man’s determination and ambition and I asked him if he was saving for anything in particular. He told me he wanted to buy a car that cost $1200 dollars that he hoped to have saved by the end of summer.

My neighbor’s son didn’t realize that what he was doing was similar to the concept of compounding money. If he repeated cutting the lawns of the neighbors that paid him weekly and added one more lawn per day each week, his money would grow exponentially. His $120 dollars from the first week of cutting one lawn a day would double the second week to $240 dollars; by adding one more a day the third week to $360 dollars and by the fourth week he would make $480 dollars for his week’s labor. His earnings for four weeks would have totaled $1200 dollars. If he thought he could make enough to buy his car by adding one lawn a day, six days a week, for four weeks, I’m sure he would have done it without any problem. Otherwise, it would take him the entire summer at $120 dollars a week to make his $1200 dollars to buy his car.

This is how compounding your money works. The goal is to take the initial investment and increase it by 30% or higher. Using this example, the first $120 dollars never left the young man’s pocket; his investment object (which was his physical labor) increased his investment ten times by adding to his weekly earnings. He would have earned ten times his initial goal of $120 dollars a week in just four weeks, a 1,000% return!

Imagine if this was your $120 dollars that you started with as your initial investment. The difference being, instead of doing a laborious type work for your money to grow, you used the internet to find investment objects with intrinsic value that you could purchase. You would have enough of a profit margin built-in to locate buyers to purchase your investment object that would give you a Return On Investment (ROI) of 30% or higher. The key to this method of compounding money is to repeat this process by reinvesting your profits back into purchasing objects of greater market value and reselling for a higher ROI.

The great thing about compounding is you can start with whatever amount of money you have to work with. You can start with $100 dollars and build enough seed capital to start two or three businesses. Use the internet to search for investment opportunities that you can invest in and build on. If a sixteen-year-old can do it with his lawnmower, you have a much greater advantage; you don’t need a lawnmower as your tool, you just need the knowledge and then the skill. Knowledge can be acquired, and the skill will come through experience. So gather together your initial start-up capital and get started!

AIG, Private Equity and Venture Capital

AIG: Maurice Greenberg’s piece in today’s Wall Street Journal nearly provoked an attack of apoplexy. I’m not sure if I’ve read such a slanted, self-serving editorial in a long, long time. I’m pretty shocked that the WSJ would publish such pandering drivel. Be that as it may, we all know that the Big Mo controls gobs of AIG shares both directly and through his management of CV Starr, so let’s just say that we know where he is coming from. When he starts out with the bailout-inconsistency argument, he kind of had my ear. But when he went on to praise the Citigroup package while chastizing the AIG deal, I couldn’t help but call bull$hit.

To date, the government has shown everything but a consistent approach. It didn’t give assistance to Lehman Brothers. But it did push for a much-publicized and now abandoned plan to purchase troubled assets. The government also pushed for a punitive program for American International Group (AIG) that benefits only the company’s credit default swap counterparties. And it is now purchasing redeemable, nonvoting preferred stock in some of the nation’s largest banks.

The Citi deal makes sense in many respects. The government will inject $20 billion into the company and act as a guarantor of 90% of losses stemming from $306 billion in toxic assets. In return, the government will receive $27 billion of preferred shares paying an 8% dividend and warrants, giving the government a potential equity interest in Citi of up to about 8%. The Citi board should be congratulated for insisting on a deal that both preserves jobs and benefits taxpayers.

But the government’s strategy for Citi differs markedly from its initial response to the first companies to experience liquidity crises. One of those companies was AIG, the company I led for many years.

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The maintenance of the status quo will result in the loss of tens of thousands of jobs, lock in billions of dollars of losses for pension funds that are significant AIG shareholders, and wipe out the savings of retirees and millions of other ordinary Americans. This is not what the broader economy needs. It is a lose-lose proposition for everyone but AIG’s credit default swap counterparties, who will be made whole under the new deal.

The government should instead apply the same principles it is applying to Citigroup to create a win-win situation for AIG and its stakeholders. First and foremost, the government should provide a federal guaranty to meet AIG’s counterparty collateral requirements, which have consumed the vast majority of the government-provided funding to date.

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The purpose of any federal assistance should be to preserve jobs and allow private capital to take the place of government once private capital becomes available. The structure of the current AIG-government deal makes that impossible.

The role of government should not be to force a company out of business, but rather to help it stay in business so that it can continue to be a taxpayer and an employer. This requires revisiting the terms of the federal government’s assistance to AIG to avoid that company’s breakup and the devastating consequences that would follow.

Hank, you’ve got to be kidding me. The U.S. taxpayers saved Citigroup’s life, and for that we may get up to 8% of the company. THAT is called a “punitive program” in Hank’s parlance for the U.S. taxpayer. In my world when you save a company you own ALL the equity, not 1/12th of the equity. The fact that the taxpayer gets up to 80% of AIG – now that starts to make sense. I agree with the Big Mo’s contention that “The purpose of any federal assistance should be to preserve jobs and allow private capital to take the place of government once private capital becomes available.” But that has nothing to do with post-restructuring equity ownership. He then pulls on the heartstrings by saying “The maintenance of the status quo will result in the loss of tens of thousands of jobs, lock in billions of dollars of losses for pension funds that are significant AIG shareholders, and wipe out the savings of retirees and millions of other ordinary Americans.” Well, Hank, that is 100% on you. YOU should have thought things through before building a company and a culture that gambled it all – and lost. You tell that retiree, that pensioner how you screwed them. That’s called integrity. This thinly-veiled call for personally getting bailed out is both insulting and offensive. And I’m not buying it. I’m sure that my fellow U.S. taxpayers aren’t, either.

Private Equity: The daisy chain of secondary sales of PE L.P. interests will almost certainly accelerate. It is one of those slow-motion train wrecks that is painful to watch. The calculus is easy to understand: public equity values plummet, PE values are stickier and fall more slowly, PE as a percentage of overall assets rises to unacceptable levels, precipitating a wave of sales of PE L.P. interests. An interesting feature of this dynamic is autocorrelation, where PE values are slow to adjust notwithstanding the public market comparables that are available. If industrials are down 40%, then don’t you think a portfolio of PE holdings in the industrials sector should trade well beyond 40% down due to illiquidity? This isn’t the way many PE funds choose to see the world, however. Regardless, the secondary market is just that – a market – and the discounts being placed on marquee funds like KKR and Terra Firma reflect this reality. Pensions and endowments have to dump stuff, and are trying to do so at a fraction of their basis. But even at fire-sale prices it is hard to move the merchandise. In the next few months we’ll see just how desperate these investors are. Might we see KKR trade at 30 cents on the dollar? It’s possible. And frightening.

Venture Capital: I attended an interesting brownbag today with my pals at betaworks. A big part of the discussion was around funding in today’s hostile environment. Here are a few of the tidbits that came out of the dialogue:

Be prepared to live with your current investment syndicate.
If possible, have a deep pocketed investor as part of your syndicate.
Raise 18-24 months of capital, no less. This can be done through a combination of capital raised plus a reduction of operating burn.
Restructurings are getting ugly. Investors, whether inside or outside, are demanding both haircuts from the last round plus and a priority return of capital such that they are fully repaid before anyone else gets anything. Looks, smells and feels like a cram down. This is why having 24 months of capital in the bank upfront is so important.
In these down times coalitions get formed between Management and New investors vs. Old investors. This mis-alignment of interests can lead to gridlock and push a company to the brink.

There was much more but these were the high points. Even with today’s difficulties there was still a lot of excitement about new companies and new ideas, with the confidence that money would come to those that truly deserve it. In short, there’s hope.

By: Binaryoptionstradingsignals

Raise Capital With Private Investors

If you have launched your own startup, your first biggest challenge is to raise capital. Fortunately, you choose from a lot of options to raise the funds your business needs. Among all the sources, crowdfunding is one of the best ones as it helps redefine how startups can get off the ground. In this article, we are going to help you know the benefits of raising capital with private investors through a crowdfunding platform. Read on to find out more.

Benefits of raising capital with private investors

1. Funding is not equity-based

First of all, crowdfunding is not necessarily equity-based. Although startups have the liberty to use the equity in order to catch the attention of potential investors, It’s not required to give up ownership to collect capital.

The good news is that some platforms allow their members to apply a reward-oriented approach in order to raise capital. For instance, if your business deals in a specific product, make sure you hand over a few units to your prospective investors before you roll it out for the ultimate users.

2. Attracting potential investors is easy

With crowdfunding, you can attract a lot of potential investors without putting in a lot of effort. Although you can try for angel investors, keep in mind that this process can cost you a lot of time. The reason is that you will have to pitch your small business concept several times.

On the other hand, if you use a crowdfunding platform, you will have to post your business pitch in only one place. And this page will be ready by hundreds of investors from across the globe.

These platforms have a lot of useful features that may help startups collect funds from investors. So, attracting potential investors and raising capital will be much easier using crowdfunding platforms.

3. Higher visibility

Crowdfunding can help you make your startup more visible. Since marketing may consume a large chunk of your budget, it makes sense to use a crowdfunding platform instead. For potential investors, it’s easy to fund a crowdfunding campaign.

And these activities can help boost the visibility of your brand. Plus, you can also attract investors for your next funding rounds.

The Bottom Line

If you want to raise funds for your startup, crowdfunding can be the best choice. All you need to do is become part of a crowdfunding platform and you will be able to tap into the pool of potential investors. And this will help you kick start your business and make it a success in the industry.

Ways to Raise Venture Capital to Start a New Business

Centuries back there was a time when people used to exchange goods for their livelihood and there was no money to buy things, known by the name of, “Barter System”. There was no buying or selling during those days. If you want “Wheat” and you had “Pulses” you could very well exchange the same with the vendor who had “Wheat” by negotiating a deal with him for exchange.

Then came an era when people starting working for others to earn money to run their livelihood. This further developed into Jobs from Government and Private Sector.

Now is the time when everyone enchants to open his own venture owing to establish something of his own and develop an empire which manifolds into a profitable venture as said “The Best income is even when you are sleeping the investment grows”.

An Idea of yours in today’s scenario can create a ripple effect which can change the lives of many. Very live examples are organisation like Facebook, Whatsapp, Google which started with a very small idea and from a room and have created an empire which inspires the Entrepreneur’s to create a Value Addition not only for them through Profit but for the Society too.

Many Starts up have started mushrooming in India now with many business ideas but they lack the rock bottom things and fail even though the business idea is too great. Inspite of the fact that they have best of people, knowledge, resources, ideas available to them but still they have tumbled. Very Live Example is Organisation like Snapdeal etc.

An Idea Flourishes when you have the Business Idea pitched to the Right People with Right Knowledge with effective and strong persuasion skills to invest money with the returns they would be getting. Firstly the Entreprenuer himself needs to be convinced that it is a great and a profitable Venture.

Second Important Thing which Start up lack is Hiring the Right and Suitable Candidates. Branding Institutes like IIM /IITs do bring in good resources but they cost very heavily to the organisation. Its always essential to hire people with experience rather than branding institutes. Experience people turn around organisation as they know how to manage crisis, success of an idea comes with experience and experience comes with learning, you know how to turn failures as these people have already experienced it.

Maintain Low Cost and Invest heavily in your people is the Right Idea for the Start ups.

Wanna Know do get in touch with me at gaggan_sahni@hotmail.com

Small Business Venture Capital Strategies

When launching a new small business, often the entrepreneur will consider venture capital as a source of funding. Here are 3 tips to ensure that venture capital funding can be secured when sending out your business plan:

Send your business plan to the right people

Venture capitalists tend to specialize in certain kinds of businesses. Some will specialize by industry, only investing in new energy companies, for instance, while others look for a certain size of company to invest in. It is worth doing the research to determine who the venture capital backers are for your industry, before you start sending out your business plan. Venture capitalists who are not specific to your industry can provide recommendations to make your plan more appealing to other venture capitalists. However, it would naturally be a mistake to send your plan to potential investors who will not even consider it.

Make sure your business has the potential to be profitable enough

Most venture capitalists look for a return of about 5-10 times their initial investment. For example, an investment in a company of $2 million should yield a return of $14-20 million after about five years. To satisfy these requirements, it is generally necessary to have a business which has the potential for a high rate of return on the amount invested. If the rate of return can reasonably be expected to be lower, such as for a clothing retailer, then it is probably better to look for an alternate source of funding, such as an investment or commercial bank.

Remember to include an exit strategy for your investor

Venture capitalists generally do not want to be involved with a new venture for an indefinite period of time. Most will plan to leave the new venture after about five years, so you should offer a clear explanation of how this may be achieved. There can be a variety of reasons for this; some venture capital managers require that the holdings periodically be sold off to acquire other offerings. Nonetheless, by demonstrating that you understand the limited time frame for many venture capitalists, you automatically make your plan more appealing than those which do not.

In summary, by sending your business plan to the right people, by recognizing what rate of return is necessary for venture capitalist involvement, and by including an exit strategy, you can improve your odds of securing venture capital funding for a new and growing business.