The Key Factors to Raising Capital
No cash needed with a financial education
“I don’t have the cash to invest.” I hear this all the time from women who do not have a financial education. But those who have done their homework and increased their financial IQ know that being able to invest is not about how much cash you have. It’s about using OPM – Other People’s Money and raising capital from a lender or investor, such as a traditional bank, lending institution, private organization, or an individual.
And today, many lenders request large down payments with strict terms. According to Foreclosure University, “consumer protection laws, time consuming and expensive court procedures, and so on have forced some hard money lenders to become even harsher when applying for a loan.”
Without money, it may seem impossible to obtain capital for your investments. But today’s savvy investors are still able to increase their cash flow. How do they do it? It’s not a big mystery. These investors know one thing: how to sell. They know how to acquire and use OPM successfully.
Raising capital comes down to four, key factors.
As I wrote previously, if you are going to be an investor, you must think like a business owner. When I first started investing, I focused solely on my persuasion skills and friendships in my sales pitches to prospective investors. And while Robert and I were able to raise a quarter of a million dollars among ten investors, it was very difficult. Learning from those experiences, I realized that I needed to look at my sales process as a business owner – not simply as someone requesting capital.
Think about it. If you are investing in something, what do you want? You want a healthy return on your investment (ROI) so when you are trying to raise capital from others, you want to give them confidence in your investment. To do this, give them information about these key factors:
Explain both the positive and negative aspects of the investment. Why is it unique and what are the advantages of your investment for the investor? Keep it simple, concise and real.
Provide the names of the people working on your project along with their experience and track record. You want to make the investor feel comfortable and confident working with your team.
Show potential investors the real numbers, when they will get their initial investment back, and how you are going to use the money. Also include any problems or potential roadblocks ahead.
To pretend you won’t have any glitches and show everything about the investment as positive, makes you look like an amateur. Investors want to know the truth and avoid surprises whenever possible.
Who will be running the day-to-day operations of your investment? Potential investors want to know everything possible about your management team. Provide backgrounds and expertise. Show how these individuals will run daily operations and deal with problems. Make investors confident in the people managing your investment.
Keep it Simple.
As I say in “It’s Rising Time!,” “Raising capital does not have to be a laborious, long, drawn-out affair.” Just give the investor what you would want as an investor: detailed information about the project, partners involved, financing, and management.
Keep your pitch to these four points and help your investors feel confident that you can deliver what you say you can. Then, deliver on your promises and watch your cash flow grow!
Now, what are you going to do to improve your pitches to raise capital?
For more information, check out “It’s Rising Time!” and our free, financial education community here.