BCA

By David Z. Reynolds

Brief overview: It does take money to make money! There are costs to be  covered by entrepreneurs seeking large amounts of $$$. Be prepared for what is a  fair cost, and what is not…

“It takes money to make money” is very pertinent when it comes to raising  millions of $$$ for a new business. There are very real costs involved in  creating that winning business you have in mind. You will soon find that the  costs of employing professionals to work on your new project takes a lot of  money – unless they are shareholders…

You also have the long list of licences,  permits and approvals that you shall usually need to acquire. It can get to feel  that you’re paying out a lot of money. But that is part of the cost of securing  your financial future – this stuff is necessary, and it costs money.

It’s also true that when it comes to raising money from investors you have  the costs of getting your business a top quality business plan, cashflow  forecasts, and some basic modelling of the business to show that it’s robust and  ‘bullet-proof’ in changeable conditions.

There are also a few financing  consultants who can guide you through the application process with an investor.  If they are experienced and capable, they should know what the investor needs to  feel safe investing in you and your project.

Business Plan is key to face-to-face meet

Without a good business plan you’re not going to get to face-to-face with the  investor to make your pitch. Many would-be business developers then find that  approaching an investment source costs money too. A broker should only charge  for success – a commission at settlement of your financing.

Be wary, and check everything. Since the Global Financial Crisis a huge  amount of capital has been destroyed – severely limiting the ability of banks  and other financial institutions to fund investment. Be just as wary of the  ‘famous names’ as you are of those you’ve never heard of…

The company you  approach may have been an active investor in the past, but check on how much  they are currently investing…

However, an investor may also want to be paid for you lodging an application.  This is valid – because they need to know who you are and whether you’re  ‘credit-worthy’.

Investor due diligence costs you money – and it can be quite a lot of money.  If the investor doesn’t live in your country, they shall want to have their  people travelling to make on-site inspections, face-to-face interviews with  everyone associated with the project. They have to. It’s unavoidable.

If you’ve  been working with good people, who can deliver, then they shall be working 12-16  hours a day on the due diligence, and avoiding partying and girls. The other  sort you don’t want to be involved with…

Overall budget for the application process to be about 0.5% of what you’re  seeking. So if you’re applying for US $50,000,000, that would involve costs of  about US$250,000 in the whole process, application and investor due  diligence.

David Z. Reynolds is a senior Financing Consultant who’s been working for  investors analysing investment opportunities for 12 years. He has undertaken due  diligence for many investors on many continents. He is the senior partner in GPC  Business Plans who can be found at http//gpcbusinessplans.com GPC provides free information for entrepreneurs that assist in guiding them  into developing their business and through the funding application process with  investors.