P1: OTA/XYZ P2: ABC
c20 JWBT144/Gordon September 25, 2009 17:55 Printer Name: Courier Westford, Westford, MA
Raise Money
at this point. This data will be of immense value to you as you communicate
with likely capital providers.
Select Appropriate Sources of Capital
There are four broad categories of sources of capital: debt, equity, miscella-
neous sources, and guerrilla financing (Exhibit 20.2).
1
1. Debt
It will be time well spent to go to a few banks and meet with loan
officers. Make sure to bring your executive summary and financial statements
with you. This will give you an opportunity to learn firsthand how banks
lend and to select the bank of your choice for a long-term relationship. You
will hear that banks lend money based on solid collateral and on your abil-
ity to repay the loan. Collateral is an asset that can be sold to cover the
debt in case you default on the loan. Banks do not want to own the collat-
eral (real estate, inventory, machinery, equipment, liquid securities, accounts
receivable). They simply need guarantees that your loan will be repaid ac-
cording to the terms of the loan. And they will not lend money without
collateral. The good news is that you will not be required to give up equity
in your company under traditional lending conditions. If you have little or
no collateral for a standard bank loan, you may be eligible for a loan backed
by the Small Business Administration (SBA). The federal government has
established a program to guarantee loans to small and emerging businesses ...