Form should follow function of course but there are

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Unformatted text preview: akes the risk of payment, so discounts are obviously quite steep. Ask your banker for additional information about factoring. Important Words of Warning Don’t take private placement, angels, and friends and family as good sources of investment capital just because they are described here or taken seriously in some other source of information. Some investors are a good source of capital, and some aren’t. These less established sources of investment may be necessary, but they should be handled with extreme caution. Never, NEVER spend somebody else’s money without first doing the legal work properly. Have the papers done by professionals, and make sure they’re signed. Never, NEVER spend money that has been promised but not delivered. It is amazing how often companies get investment commitments, contract for expenses, and then when the investment falls through, find themselves left in the lurch. CHAPTER 22: GETTING FINANCED 22.5 Submitting a Plan to a Bank As we point out in the discussions in this chapter, the process of taking out a bank loan is quite different from raising venture capital or angel investment. Banks are not allowed to invest in a business plan in an entrepreneurial way because they are using depositors’ money and they must by law have real collateral to back up any loans. Therefore, the plan you submit to a bank is different from what you submit to a potential investor. For a bank loan, your plan needs to have the same critical information as for any other use. However, it should also have more financial detail, more past history, and more information on the personal financial position of the members of the management team, the balance sheet of the business, and financial history of the business. Owners should expect to submit a personal financial statement, and for most smaller businesses and newer businesses the owners will frequently have to place personal assets at risk, and offer personal guarantees. W hat Banks Want to See Along with your plan, commercial banks will also want to see a loan application, copies of past tax reports for company and principals, good documentation of...
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This note was uploaded on 01/26/2014 for the course BUINESS 102 taught by Professor Unknown during the Winter '09 term at University of Phoenix.

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