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Tuesday, January 5, 2010


Capitalization needs will arise if you are starting a new business, expanding an existing business, buying a business or for day to day operations if your revenue is slumping.  Many vehicles are available for business capitalization.  Mainstreamers of the past went to banks, venture capitalist or the market place.  Based on the current days economic climate and the new restrictions placed on banks by the FDIC (newly implemented reserve requirements for banks lending on secured transactions) then many would wager your chances to be slim to none. 

I happen to be a guy that always started my business without a dime.  I capitalized my business with the market that I serviced.  This is difficult at best, but I survived and learned a lot of valuable lessons in the process.  One of the things I learned as a student in BOOM (Business Ownership Operations Management) is to make sure that if you are going into business that you are properly capitalized.  Now, I broke that rule a lot, but that is typically the golden rule.  Though exceptions exist and questions arise, such as; how much money do I need?  How will I allocate my funds and who will supply my funds?  Many of us are not born with a silver spoon in our mouthes and we may not have superior credit to obtain a bank loan, so how do you capitalize your business?

One of the first things that you should do if you are opening a business is to research who has money, how are they spending or loaning or investing their money, how much money does the lender or investor have and what is the criteria for this group to give you access.  Once I heard a guy blurt out in a conversation over coffee, "Man if I had a $100,000 I would open a liquor store".  I couldn't resist the question, "How do you know that a $100,000 will be amount that you will need to open a liquor store?". I didn't receive an answer.  Well you really have to do your homework to determine what you will need.  I am willing to bet the farm that you will need resources beyond money. 

Do your homework and your criteria for successfully starting and operating your business should change dramatically.  Doing your homework means that you should plan and if you are not willing to do this yourself then develop a team of like minded individuals and either pay them or offer them ownership in the company.  Upon identifying a team which should be diverse, then begin your research.  Break the research down into sections or categories and give each team member an assignment and a time limit to bring back information on their category or section.  Compile the information and formulate an executive summary, a budget, projections, supportive marketing and sales strategy based on feasibility studies or demographic buying habits and competition.  This compilation should allow you to plan based on your strengths and weaknesses. 

So whether you are seeking a grant, venture capital, a loan, private equity or market based capitalization you will have to begin by researching you needs based on what you desire to accomplish.  Either your goal will be adjusted or you will be able to formulate a dead on plan based on the affirmation or statement that you make concerning your business interest.  Of course positive thinking and affirmations are a big part of successful businesses, but you better have a hedge and an edge because I am sure the graveyard at the secretary of the states office is lined with many business interest that began with positive affirmations, but where not researched and planned.  One thing is for sure, once you have a plan in place you can take your business anywhere you want it to go and capitalize it with any one of the vehicles available on the open marketplace.