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Efficient Method to Capitalize A Business for Expansion
KnightNguyen
subscriber Posts: 6
Earlier today we remarked about the economic climate and its ability to support start up funding. The remarks are relevant to businesses looking to expand as well. The comments of today's economic climate are well substantiated for existing businesses.
50 years ago it was possible to walk into a bank and obtain a loan on a handshake through your personal banker. The Savings & Loans crisis changed the landscape in the 1980's and resulted in the expansion of what we know to be the FICO system (Credit Scores).
For much of the 1990's if you had a great credit score, solid tax returns, and were able to personally guarantee a loan it was possible to obtain it through your bank. In the wake of the dot com crash the market was challenged with technology based products and the rush turned to real estate. Again the credit system was over used to the point where lenders collapsed in 2008.
Where does that leave today's honest business man who has a great idea but limited capitalization to expand their proven business?
Just as we discussed in start ups today's climate forces us to think outside of the box. We must also undertake funding with realistic expectations.
There are no 48 hour funding options, unsecured routes, or no financial structures that allow funding from institutions at any sustainable rate. This leaves the private equity market open.
In a sense of increasing legislation, tighter regulatory scrutiny, and the fact that the largest wealth transfer from private to institution occurred in 2008 we must remember the equity pool is much, much, much smaller!
Few people have discretionary capital to make investments, and most people are dealing with a struggling economy. Where is all the money?
The money is in retirement accounts. People who have been working and having their pay checks deducted without paying attention to it.
SO how does a company that is established gain access to it? It starts by working with a financial advisor, broker dealer, or investment bank to do a little known thing called "Direct Public Offering". A Direct Public Offering allows you to offer investments to normal everyday people. In conjunction it can be structured to have IRA accounts invest.
The largest concentration of wealth is in retirement accounts and they represent an overwhelming majority of people's net worth. In some instances it is estimated that aside from personal real estate it may make up almost 90% of all other discretionary assets of people's net worth.
The key to capitalize a small company in today's climate is to "Follow the Money". Those that continue to avail the normal outlets (private investors, accredited investors, banks, et cetera) will find that their businesses will live and die with the market. Until credit extension shifts from the banks / institutions to re-transfer all of the wealth from 2008 financial collapse back to the private sector businesses will continue to struggle for capital.
Take advantage of new ways to capitalize your business and research to find a better option. The definition of insanity is doing the same thing over and over to expect a different result. Don't go insane funding your business.
This article or post is not to be interpreted as any form of investment advice to any person. The information above is a general view point without any specific audience intended only to be used as an informational tool by those willing to independently research the topics discussed herein. Nothing will be interpreted as an application to your particular circumstance and the author makes no attempts to determine suitability for any reader within this forum thread. If you would like to discuss the contents of this article and its application to your particular situation please contact Knight Nguyen Investments, a Texas Registered Investment Advisor. Please note if you do not reside within the State of Texas you may or may not be eligible to become a client of the firm if inquiring services. Please consult with Knight Nguyen Investments to discuss the eligibility of being accepted. The contents of this post did not create a profit or fee in any way for Knight Nguyen Investments.
50 years ago it was possible to walk into a bank and obtain a loan on a handshake through your personal banker. The Savings & Loans crisis changed the landscape in the 1980's and resulted in the expansion of what we know to be the FICO system (Credit Scores).
For much of the 1990's if you had a great credit score, solid tax returns, and were able to personally guarantee a loan it was possible to obtain it through your bank. In the wake of the dot com crash the market was challenged with technology based products and the rush turned to real estate. Again the credit system was over used to the point where lenders collapsed in 2008.
Where does that leave today's honest business man who has a great idea but limited capitalization to expand their proven business?
Just as we discussed in start ups today's climate forces us to think outside of the box. We must also undertake funding with realistic expectations.
There are no 48 hour funding options, unsecured routes, or no financial structures that allow funding from institutions at any sustainable rate. This leaves the private equity market open.
In a sense of increasing legislation, tighter regulatory scrutiny, and the fact that the largest wealth transfer from private to institution occurred in 2008 we must remember the equity pool is much, much, much smaller!
Few people have discretionary capital to make investments, and most people are dealing with a struggling economy. Where is all the money?
The money is in retirement accounts. People who have been working and having their pay checks deducted without paying attention to it.
SO how does a company that is established gain access to it? It starts by working with a financial advisor, broker dealer, or investment bank to do a little known thing called "Direct Public Offering". A Direct Public Offering allows you to offer investments to normal everyday people. In conjunction it can be structured to have IRA accounts invest.
The largest concentration of wealth is in retirement accounts and they represent an overwhelming majority of people's net worth. In some instances it is estimated that aside from personal real estate it may make up almost 90% of all other discretionary assets of people's net worth.
The key to capitalize a small company in today's climate is to "Follow the Money". Those that continue to avail the normal outlets (private investors, accredited investors, banks, et cetera) will find that their businesses will live and die with the market. Until credit extension shifts from the banks / institutions to re-transfer all of the wealth from 2008 financial collapse back to the private sector businesses will continue to struggle for capital.
Take advantage of new ways to capitalize your business and research to find a better option. The definition of insanity is doing the same thing over and over to expect a different result. Don't go insane funding your business.
This article or post is not to be interpreted as any form of investment advice to any person. The information above is a general view point without any specific audience intended only to be used as an informational tool by those willing to independently research the topics discussed herein. Nothing will be interpreted as an application to your particular circumstance and the author makes no attempts to determine suitability for any reader within this forum thread. If you would like to discuss the contents of this article and its application to your particular situation please contact Knight Nguyen Investments, a Texas Registered Investment Advisor. Please note if you do not reside within the State of Texas you may or may not be eligible to become a client of the firm if inquiring services. Please consult with Knight Nguyen Investments to discuss the eligibility of being accepted. The contents of this post did not create a profit or fee in any way for Knight Nguyen Investments.
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