4 Simple Ways to Raise Equity & Keep 100% Of Your Company
Hershel Pierce founding director of Pavillion Bank and owner of SBA Capital has been a lender since 1982. He is an EXPERT at navigating the Small Business Administration’s (SBA) requirements, which, although necessary to secure an SBA loan, can be difficult. Raising money to fund your venture is a rite of passage for most entrepreneurs, the barrier to entry into opening a business often equity and how to raise it. In this article Hershel shares his tips to raise the equity while keeping 100% of your company.
Monetize the value of other assets you own
Entrepreneurs can tap into the non-savings areas of their assets to help fund their business. Assets that have a verifiable financial value can often be monetized (assigned a monetary value) to use the asset in the securing of an SBA loan. If you have equity in other investments such as rental property, commercial properties, your office building, etc. SBA-Capital will monetize, or give credit, for that value and allow you to reduce your cash equity requirement accordingly.
Gift letter
A gift is one of the simplest ways of obtaining business capital and many investors have parents that would like to help by giving (not loaning) their children part or all the required equity. To meet SBA guidelines parents will provide documentation confirming this is a gift and not a loan. Read more here on the SBA’s controls over cash gifts.
Pledge specific assets where the value will not decrease
A pledged asset is transferred to a lending with the purpose of securing a debt. One example is the cash value in your life insurance policy. You can use these funds for part or all your required equity depending on the number of dollars involved. SBA-Capital will assist you in the communication and documentation with your Insurance Company to make this transaction become a reality. Other assets that can be pledge are US bonds, personally owned annuities, etc.
Using funds from your qualified IRA account (best kept secret in raising equity)
Specific guidelines must be followed to be sure everything is properly documented with the IRS. Otherwise it will be considered a withdrawal of funds. SBA-Capital is experienced in how to set this agreement up properly and will work with each borrow to make sure you have written authorization from the IRS that your funds are being used as an investment and are not considered a withdrawal. Read our previous blog post on this very subject here. After the agreement has been properly established you have total control and possession of your assets to invest as you so determine. The key word is “all funds must be used for investments and may not be applied toward any personal expenses”. Great tool to raise equity, earn money for your IRA account, and maintain 100% ownership of your investment.
SBA-Capital offers SBA loans to business owners nationwide. As a Dallas, Texas based company, our lending team has been providing quality service for our customers for 32 years. Our objective is to match your short and long term financial needs to the best SBA loan program available. Please contact Hershel Pierce for a free recommendation on which loans you should consider for your financial planning.