Private financing in recent years has been the main source of bread and butter cash flow for many businesses trying to find a big break and scaling up. While there are usually a good number of really great business concepts, they often hit a wall on how much can be done as a micro-business with a few people. That’s the point where the business needs to grow significantly in staffing, equipment and size to meet the demand that’s available and really leverage the income potential. To do that, however, a small business needs big financing and investment.
While business loans from banks or the Small Business Administration is what the majority of small business owners think of at first, these options can often be disappointing. The criteria and lending requirements involved can be burdensome as well as hard to meet. Leaving a business owner with a lot of wasted time and nothing to show for it. No surprise, many look to private financing as an alternative.
However, private financing often depends on how an investment agreement is put together. Many investors are not just satisfied with providing money and getting it paid back with interest, they also want an ownership right in the business and the ability to influence management. Essentially, a business owner or team has to consider handing over some control of how his company is run to get the needed cash to make it grow.
Ownership in a company, known as equity, brings in new players with new ideas of how things should work. As a result, defining everyone’s roles, rights, obligations and power is critical to making the investment arrangement work as a win-win situation. Otherwise, a business owner can quickly find himself at odds with an investor or worse, getting kicked out of his own company. That happened to Steve Jobs as well as one of the founding members of Facebook, Eduardo Saverin.
Writing up an equipment or partnership agreement isn’t the only step either. A full investment arrangement often includes a number of critical pieces of paperwork, requiring good legal review to be done right. For those needing help from a good Washington state private financing attorney or legal office, Attorney Gary Schuetz should be considered. His experience as a Renton private financing lawyer has proven significant for clients wanting to protect their business interests but grow their company quickly.
Trying to take care of an investment agreement without good legal guidance is a big mistake, and professional investors will take advantage of that weakness when seen. Grow your business the right way by crafting an agreement that works.