Monday, May 12, 2008

Raising Money For Your Business or Idea

A Term Sheet is what you give to a bank, angel investor, venture capitalist, or an investor from whom you would like to get money for your business or investment. This is something that everyone should know how to do as it goes along with writing business plans. Most of the time, the above sources of capital will only want to take a look at your term sheet. This is a snapshot of your business plan, a 30 second infomercial for your business plan or idea.

If I’m a bank or a hard money lender and its just a debt, what I want to see are the 3 Cs – Cash flow, Collateral, and Character. But if you are an equity investor, you focus on the strength of the team, their business plan, and their ability to execute it. This is usually based on past experience.

When is a Term Sheet used? When you are looking for private money and/or VC. Hard Money lenders go more on collateral. When you have an off the wall idea, a residential development project, an invention, and basically anything that is outside of the box you need a Term Sheet. Anytime you are presenting your story and have a desire to raise money that’s not in a traditional banking setting, you want a Term Sheet. Something in a one or two page format, that’s pleasing to the eye graphically. There are one page term sheets and there are 14 page term sheets, and everywhere in between.

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