When most people ask me about so-called “hard money lenders” they are more times than not looking for access to lenders that are willing to take on more risk because they believe, or know, they can’t qualify for a traditional business loan.   The thing is, that isn’t entirely what hard money lenders are all about. So, let’s take a look at what a hard money lender is and how they work.   Sources of repayment   Business lenders are looking for what is called “sources of repayment”.    In fact, they are looking for multiple sources of repayment when possible. For most business loans the primary source of repayment is proving your ability to pay (i.e. existing cash flow) the lender back it’s principal plus the interest you owe. The secondary source of repayment can vary but is often collateral. Should your cash flow prove inadequate the lender seizes the collateral and sells it to recoup some of their funds.    When the secondary becomes the primary   Hard money lenders flip the primary and secondary sources of repayment around. Instead of being focused on your ability to repay the loan through cash flow, these lenders focus on the secondary source of repayment or the collateral they have secured.    Keep in mind that there are a variety of types of collateral. I actually discuss this, and more, in my course the “Complete Guide to Business Loans”. As you might imagine, hard money lenders prefer to secure their loan with collateral that is worth more than the loan amount they have given you and is a type of collateral that will hold its value better than others. Can you guess what type of collateral is preferred? Winner, winner…chicken dinner if you said real estate.   When are hard money lenders right for you?   If, traditional business lenders like cash flow and hard money lenders like collateral then the right time to seek a hard money loan is when you and/or your business are lacking in cash flow but have some valuable collateral that you are willing to secure a loan with.    In most cases, a hard money loan will carry a higher interest rate because of the inherent risk associated with a business that is lacking in enough positive cash flow. But, in certain instances, a hard money loan makes complete sense.   If you’d like to talk about your particular situation and get my input on what type of loan, if any, makes sense for your business just reach out to me here.

I was recently asked how raising funding for a non-profit work. You have to remember that investors are looking to earn a significant return on their money for investing in your idea. So, right away we have to almost throw out the idea of an angel investing in your non-profit.    What you are really looking for are donations. And approaching donors is not so different than approaching investors.    You have to know where to meet them and how to close the deal!

 

The failure rate for startups is high and there are plenty of common mistakes startup founders make. One that I see quite regularly is being greedy with your startup equity.   I get it. This business is your baby and the thought of giving up too much startup equity can be scary. After all, you might be letting go of potential future value.    However, you have to remember that in many cases your chances of being successful increase when you are able to land investors. Yes, you are going to have to give up some of your startup equity. But, would you rather own equity in a business that actually grows or one that never does because you were too afraid to take on an investor.

Today we are looking at the idea of pre seed capital and what it is.   Raising money for a business typically happens in phases. Those phases often include;  

• “F.F.F” or the Family, Friends, and Founders round
• Seed capital, which is generally your first funding from an outside investor
• Series A round
• Series B round
• and so on

  So, where does pre seed capital fall in the mix? Well, exactly where you might expect. Just before your seed capital round or around the F.F.F. round.    I recommend treating investors in a pre seed capital round just like you would any other investors. Even if they are related to you. In fact, treat them like a normal investor because they are related to you!   Pre seed capital investors should have a chance to review your pitch deck and projections, as well as any other type of due diligence they require.

Welcome to another episode of Funding Simplified, where I simplify the business funding process and share lessons I have learned after being involved in over $500M in debt or equity deals. In today’s episode, I wanted to talk about how to attract angel investors.   There are many things that angel investors look for in a startup opportunity. But among those things, there are a few that are more powerful than the others.   Here are just three things that can help you attract angel investors.   A team   Not just any team, but a real experienced team. In fact, if at all possible, having someone on your team that has been in the startup industry for a while and has had success (i.e. has sold a startup before) goes a long way in attracting angel investors. If your team doesn’t have that level of startup experience or any at all, that is ok. Maybe you have a lot of domain or industry experience that you can lean on to help you be successful.    One thing I don’t recommend is the lone employee approach. Investors often frown on a lack of teammates. That is because it is unlikely that you can do everything or that you have every skill set needed to successfully run your business.   An addressable market   Opinions vary on the most common reason startups fail. Reasons like a lack of funding or an inexperienced team are common. Another common reason is that your idea didn’t really have a market to address where there was enough demand. Which is something you should have uncovered in your validation efforts?   On the other hand, when you can prove that the market is demanding a solution like your’s and they are willing to pay for it then you are off to a good startup with investors.   IP   Not every investor requires that a startup they fund has intellectual property. However, the investors I know really well love startups that do have intellectual property protection in place. That is because it makes your startup harder to copy and affords both you and the investor some protection or barriers to entry.   For more information on how to attract angel investors check out these free resources.

Welcome to another episode of Funding Simplified, where I simplify the business funding process and share lessons I have learned after being involved in over $500M in debt or equity deals. In today’s episode, I wanted to talk about how to get in contact with investors.   There are many ways I recommend startup founders go about contacting investors. The key distinction is that none of the methods I suggest are what I consider “cold”. I have read about startups cold calling investors and getting lucky enough to land a meeting and maybe a few of those have ended in investments. But, that is extremely rare.   Here are just three ways I recommend on how to get in contact with investors.   Introductions from other investors   Experienced investors tend to network with other investors. One great way to get in contact with investors is to be introduced to them by a peer of theirs. Even if the investors doing the introduction has chosen to not invest in your startup, an introduction is still one of the best routes to go. It could be that your startup idea is outside their area of expertise, but not outside of the expertise of the investor you are going to be introduced to.   Introductions from other startups   By now you should know that the average startup needs to meet with a lot of investors in order to land funding. In fact, some estimates put that number at 100 investors for every one investment. Because startup founders, the good ones, network with a lot of investors they are likely able to make introductions for you to investors who might have an appetite for your idea.   Networking   Some people despise the idea of having to talk with random strangers. But as a startup founder, you should be networking with as many people as you can. If for no other reason than to share the message about what you are working on.    An even better reason for networking is to hopefully meet potential investors. I often recommend attending pitch competitions in your area or your local startup accelerator/incubator program.   For more information on how to get in contact with investors check out these free resources.

Welcome to another episode of Funding Simplified, where I simplify the business funding process and share lessons I have learned after being involved in over $500M in debt or equity deals. In today’s episode I wanted to explain MRR, or monthly recurring revenue.   Just like many other industries, the startup industry and investing in the startup industry has its own fair share of acronyms. Monthly recurring revenue, or MRR, is one of those terms that is talked about regularly.   It is important to understand that when referred to, MRR is a statistic that is typically tracked on a 30-day cycle. Additionally, MRR is most commonly used in a few primary industries. The most common of those is the SaaS, or Software as a Service, industry. These are software solutions that customers often pay fees for access to. Those fees can be an annual licensing fee or a monthly subscription fee.    Investors often like startups that have monthly recurring revenue because that means the business has some established, regular income coming in. They will often use MRR to help determine a startup’s valuation and to calculate the speed of repayment on certain types of hybrid funding (such as convertible debt).    Now, one mistake some startups make is doing a one-time special sale of their solution and counting that as MRR. That is not MRR and that revenue should not be counted as on-going revenue.   For more information on funding your business check out this resource.

One key to successful funding is knowing whether loans versus equity is the better path to go down.   Many entrepreneurs rush head straight into trying to find investors that will fund their business venture.   But not every business is right for investors. For example, a lifestyle business that has little chance of growing larger than providing for one person is not a good candidate for an investor.   So, how do you know whether loans versus equity is right for your business?   Here are a few ways to decide.   For more information on funding a business please join me at JonathanMillsPatrick.com.

Cortney Piper had zero interest in being an entrepreneur. It would seem the business world had different plans for her career.   With the help of some amazing mentors, a talented team, and a knack for knowing the type of companies Piper Communications works best with (meaning those whose values match her own) Cortney has built a company that thrives on making an impact.   We also discussed some best practices for startups to consider when attempting to garner some much-needed PR attention.

On today’s episode, we spoke with Jason Loyet of Solar Site Design.   Jason moved from St. Louis, a strong startup city in and of itself, to Nashville, TN and since graduating from college in 1997 has founded multiple companies.    During our chat, it became clear that Jason is a lifelong learner and that skill has allowed him to notice trends that he could build businesses around. They include a mobile streaming platform, newspaper photo capture solution, and his most recent startup which helps solar contractors find more prospects and more!   The company has accomplished many milestones already. Including completing two accelerator programs hosted by Village Capital and the Nashville Entrepreneur Center, as well as winning an award from the U.S Department of Energy’s SunShot Initiative.