The Diversa Group

The ability to obtain money for a business to start up or grow is as necessary to the operation as is a good location, the right equipment, reliable sources for supplies and materials or an adequate labor force. It is important to explore all of your financing options before making a decision; several sources to consider are:

•	Personal Savings & Credit Cards: The primary source of capital for most new businesses comes from savings and other personal resources. Credit cards are often used to finance business needs.
•	Friends & Relatives: Many entrepreneurs look to private sources such as friends and family when starting out in a business venture. Often, money is loaned interest-free or at a low interest rate, which can be beneficial when getting started.
•	Banks & Credit Unions: The most common sources of funding, banks and credit unions, will provide a loan if you can show that your business proposal is sound.
•	Angel Investors & Venture Capital firms: These individuals and firms help expanding companies grow in exchange for equity or partial ownership.

Additional sources of capital include:
• Credit Cards
• Customer Financing
• Employee Stock Ownership (ESOP)
• Home Equity Loans
• Mergers and Acquisitions
• Purchase Order Financing
• Strategic Partnering

The initial and growth funding for a business comes from a variety of sources. Sometime it will come from internal sources. This can take the form of self-funding, family, friends or credit cards. If sufficient funding is not available internally, the owners must seek financing from external sources. When the decision is made to seek external financing the owner would be well served to seek professional assistance.

Approval of your business loan and securing funding from investors or venture capital firms depends on how well you present yourself, your business, your financial needs and how you demonstrate your profitability and their Return of Investment (ROI). Remember, lenders and investors want to make loans and investments. The key is they must make loans they know will be repaid and their investments payoff in terms of profits for them. Many banks, investors, and venture capital firms look at the 4 M’s.

Markets
Banks, investors, and venture capital firms invest in companies that sell into growing and profitable markets. Ideal markets are measured in billions of dollars and growing at certain percentages per year. These markets tolerate some difficulties while still allowing for sufficient returns, even with a single-digit market share as the eventual outcome.

Merit
Banks, investors, and venture capital firms look for products or services that are clearly positioned in the market and for which customers are clamoring. The most successful companies have a highly creative, unique approach to solving an important customer problem or improving an existing solution. We measure the merit of a business by the partners it has or can attract. We also consider a company's ability to control its distribution channel(s).

Margins
For banks, investors, and venture capital firms to invest or provide loans businesses must have a clearly thought-out business plan and model that provides long-term profitability. High-margin businesses develop when you have one or more sustainable competitive advantages, such as a superior product, service or technology and a strong brand.

Management
Banks, investors, and venture capital firms look at businesses with leaders with successful track records and a team with the right expertise. They seek out founders who have a demonstrated ability and desire to grow the venture. When evaluating companies, they look closely at:
• The quality of the founders
• Their knowledge and expertise of their field
• Their ability to work effectively with experienced and professional managers.

The best way to obtain a loan and/or investment from investors and venture capital firms is to prepare a business plan. A well-written business plan contains:

Raising capital is a critical business activity. It is not always easy; in fact, it is often a complex and frustrating process. However, if you have studied, planned and prepared effectively, raising money for your business will go as smoothly as possible.

Knowing what lending institutions require in a loan application and how it should be packaged requires some degree of expertise. Knowing what investors and venture capital firms are looking for and how to develop a business plan and growth plan the will impress also requires expertise. The Diversa Group can assist you in gathering information and preparing the documents that will comprise the loan package.

Lines of Credit
A line of credit loan is designed to provide short-term funds to a company in order to maintain a positive cash flow. Then, as funds are generated later in the business cycle, the loan is repaid. Most commercial banks offer a revolving line of credit, where a fixed amount is available.

Conventional Business Loans
Traditional loans, often called long-term debt, are often popular initial financing venues for businesses competing in a proven field. Lenders often include government-sponsored lending programs, commercial banks, and small business investment companies.

Small Business Administration (SBA) Loan Program
The SBA offers numerous loan programs to assist small businesses. These include Basic 7(a) Loan Guaranty, Certified Development Company (CDC), a 504 Loan Program, Microloan, a 7(m) Loan Program, and Loan Prequalification. SBA is primarily a guarantor of loans made by private and other institutions.

SBA's Small Business Investment Company (SBIC)
A source of venture capital is the SBA's Small Business Investment Company (SBIC) Program. SBICs, licensed and regulated by the SBA, are privately owned and managed investment firms that use their own capital, plus funds borrowed at favorable rates with an SBA guarantee, to make venture capital investments in small businesses.

Business Alliances
A strategic alliance is an arrangement between two or more companies to pursue a common business objective, such as a joint venture, merger, or cost-sharing plan. Is it right for your business?

Angel Investors
Traditionally, angel investors have been business owners or independently wealthy individuals that finance businesses in exchange for equity. Increasingly, however, angels are banding together into local networks that closely resemble venture capital groups.

Asset-Based Financing
Popular with new companies that are growing faster than they can make money, asset-based financing is a system in which lenders accept the assets of a company as collateral in exchange for a loan. Most asset-based loans are financed against accounts receivable and less often against inventory, since receivables are among the most liquid of a company's assets, followed by inventory.

Venture Capital (VC)
While most banks use past performance as the primary criteria for deciding whether or not to lend money to businesses, VC firms make investments based on projected future potential. Investors generally expect a substantial portion of the business' equity and/or profits. Have a qualified lawyer negotiate any investment deal between VCs and your company.

Investing In Someone Else's Business
Investing in someone else’s business can be a great opportunity. You may be interested in the business as a good investment, as a way of helping a family member, or a way to develop a potential customer.

Small Company Offering Registration (SCOR)
A SCOR is the sale of common stock to the public without the hassle of an Initial Public Offering (IPO) through a regulated board such as the NASDAQ or AMEX. Unlike formal IPOs, in which all or most stock is sold and monitored through third parties, most companies involved in a SCOR deal directly with shareholders.

Initial Public Offerings
All offerings of stock and other securities are subject to the federal securities laws as well as to the securities laws of any state where the securities are being offered or sold. Unless there is an exemption that applies to a given situation, these laws generally require that an offering go through a difficult securities registration process.