Growing your business is exciting. Nearly every small business owner I have spoken to says they would never go back. 

The concept of fundraising tends to dampen this enthusiasm. Many entrepreneurs would rather walk over hot coals or spend months of sleepless nights hoping they can make payroll than talk to a bank or an equity provider. The books will be dissected. Painful, nit-picky questions will be asked about controls, reporting, timing. No one has time for that! 

Why not just wait until you actually need the money to fund raise? When you won't be able to make payroll if you don't bridge the gap or you are on the verge of a big expansion, but just need a small bridge loan. Then it will be worth those hours of cleanup and questions from information hungry bankers and investors. Why not just wait? 

Because the absolute WORST time to fund raise, debt or equity, is when you need the money. I know, it's counterintuitive. But if you wait until you need the money, you are too late. 

A fund raise takes time. It can take three to twelve months to raise capital. Timing depends on several factors, including:

• How your books have been put together
• The volume of transactions in your business
• The risk tolerance of the bank or equity provider to your industry
• Finding the right partner and best terms for your busines can take time

IS MY BUSINESS READY?

For A Loan: First, your financial books are consistent, timely (books are closed 2-3 weeks after month end), there is historical data (going back two to three years), and everything is in the format the bank is looking for. 

Second, you have answers to all their questions within a day or two of request. In this ideal situation, the banker can put together a package, run it by his boss, ask you a few more questions, go to the committee, ask you a few more questions and finally get the loan approved by his or her board. Once the loan is approved it is time to draw up the paperwork. This can take several more weeks. All of this before the first check is written. 

For Equity: Many of my clients assume equity is easier. Equity is more risk tolerant, so venture capital and private equity will be easier to raise than debt, right? Unless you are raising money from Uncle Phil, who trusts you implicitly, has the ability to easily write a check, and who already knows your business inside and out, it's not.

Uncle Phil knows you, knows your story, the milestones you have achieved, and the commitment you have to this business. Ms. Smith or Mr. Doe at XYZ ventures do not know you or your business. They often have not met you until you consider raising capital. It takes time to build these types of relationships. They will ask 100 questions not because they think your business is a bad business. They may be very excited about your business, but they do not know you or your business - yet.

It can take months, even years, to build up trust with an equity partner. It is never too soon to get in front of equity partners. Talk to a few about your business, ask if it is a good fit for their fund, if not, ask which fund it might be a good fit for. Find people that are excited about your business. Take the time to find well-funded, supportive, investors that will stand with you if you hit a road bump. Trust goes both ways. There is nothing more destructive to a business than a bad partnership with a capital provider. 

If you need help preparing for a capital raise, never hesitate to call. We can do a preliminary assessment on whether you are ready to approach debt or equity investors. Then provide additional steps to improve your fund raise. Please email blair@relieffinancialconsulting.com for more information.