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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