Raising Capital: Don’t End Up Like Greece!

The financial struggles of the country of Greece have been well documented recently. While the details of situation can be confusing, the basic problem is quite simple: Greece doesn’t make enough money to pay its bills. During the favorable economic climate of the early 2000s, Greece took on additional obligations--assuming that they would be able to cover the bills when they came due. Unfortunately, as the global economy collapsed in 2007, revenue dried up. As a result, Greece is currently scrambling to secure financing from partners in the European Union and other resources across the globe.

What’s the lesson for business owners? Beyond the obvious lesson of “don’t spend more than you make each year,” the real takeaway for business owners is that undercapitalization exposes a business to the possibility of financial collapse. Unfortunately, for many smaller businesses, securing additional capital can be a challenge. Below are tips to keep in mind when it comes to securing cash for your business:

1) Look hard for free money.  There are a variety of government programs--state, local, and federal--that are offering financing in the form of grants or tax credits for small businesses. This is particularly true for small businesses that are looking to hire, but even businesses not planning to hire in the near future can often receive money in the form of grants. For information on these programs, contact your local government offices as well as the local SBA (Small Business Administration) office.  

2) Search for angel investors.  By networking with local business owners and executives, small business owners can often connect with “angel” investors. Angel investors are simply private investors who are often willing to invest into a company with the hope of achieving high returns in the future. Of course, you will have to impress them with you business model--but if you have a great idea, you can often find an investor to get behind it.  

3) Seek an SBA-backed bank loan.  Many small business owners have tried to secure conventional bank loans and come away frustrated. Fortunately, the SBA partners with many banks in order to make loans more accessible for small business owners. These loans are often used for the purchase of new equipment, for working capital, or to enable a business to make new hires. Contact your local bank and ask about their SBA program for more information.

As the nation of Greece can testify, waiting until it is too late to seek funding often leads to disaster. Even if your business is currently stable, as the owner you would be wise to investigate sources of additional funding. Unfortunately, if you wait until you truly need the money, it is often too late.  If you are currently facing the possibility of bankruptcy, contact your business bankruptcy attorney and ask about means of raising additional capital.  

[Image: Flickr user Sharon Drummond]

 

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