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     Venture capital has helped to fuel the growth of most of the world’s biggest public companies at one stage in their life-cycle. Venture capitalists are willing to run the risk of making poor returns, or losing all of their money, for a chance to hit a home run. That’s also why venture capital tends to follow big ideas, and is hard to get it when you’re looking to do something that isn’t too disruptive or innovative.

     The Dynamics of Venture Capital Funds

     When entrepreneurs are looking to raise money from venture capitalists, they often have a poor understanding of how the market works, according to a 2002 report by Financial Director. Venture capital firms do not raise their funds from shareholders; they usually raise their funds from private institutions. They will then charge a management fee, and take a percentage of equity for themselves. Venture capital firms also have a tendency to work together – often they will have other firms invest in a deal along with them. This can be to limit their exposure, and bring in expertise from other firms. Some venture capital firms will take an active role in managing their investments, while others prefer not to.

     Don’t Be Too Scared Of Equity Dilution Read the rest of this entry »

     During primitive stage, the venture capitalists keenly notices the merits and demerits of the company, based on this, they invest a small amount signing a long term relationship. This is called ‘early stage investing’. Later, they show their active participation by increasing the amount of investment based upon the profit. This is known as ‘expansion stage financing’. Usually, they tie up in parallel with multiple venture capital firms, thus acquiring multiple funds in the same time. The capitalist maintains the contract throughout the company in his later stage investing and provides a big support in the growth of the company.

     Structure of the Investment:
     There is a fixed duration for the investment and it last from seven to ten years. The venture capitalist has the fixed duration signed up with the company called ‘call down’. The early stage investment takes five years to get complete whereas the later stage investment requires a period less than the previous one. Therefore the investment cannot be short term in case of venture capital.

     General Types of Investors
     Venture investors are usually generalists who invest in public sector companies and industries which may be spread out in various geographic locations. It does not matter whether the invested companies are in their starting stages or in the developed stages. Read the rest of this entry »

     When faced with financial challenges, most business owners try to raise capital by going to the bank or trying to find investors. Although banks and investors may be a suitable source of capital for some businesses, the majority of business owners come out empty handed.

     Bankers are notoriously conservative when making loan decisions. Unless your business can show that it has significant assets and can demonstrate three years of profitability, it usually won’t qualify for a business loan or a line of credit. Finding investors (whether angel funders or venture capitalists) is even more challenging. And those that are successful in finding investors always have to give up a significant stake of their ownership before seeing a penny.

     So, are there any alternatives?

     If you own a business that sells products or services to other businesses you have two financing alternatives. Both are easy to qualify for and do not require that you give up any ownership. The main requirement is that you have a business with solid growth prospects and that you provide products/services to good paying commercial customers.

     Invoice Factoring Read the rest of this entry »

     Cash out refinancing works really well as a way out of debt with numerous benefits, but there are some risks involved to get those benefits.

     Refinancing means to finance again, which means that to do this you are going out and getting a new mortgage for your home. As you may remember from the first time around, this sounds a lot easier than it actually is.

     Also, this time around you have to worry about closing off your original home loan. You’ll want to look into whether there will be any prepayment penalties on the loan as these can be extremely costly.

     When you are deciding whether this is something you really want to do you’ll need to calculate out all the costs and see if this is really worth it. You’ll have to do everything over again for this new mortgage, including a home appraisal, mortgage insurance, and all the other miscellaneous fees that add up. After you find out how much this will cost you’ll need to decide if that cost is worth it to you.

     Once you have your new mortgage you take the money you have already paid on the home with your original mortgage and use it to pay off your debts, home improvement project, or whatever else you decided to free up the money for. This is the cashing out part-you are cashing out the money you have paid off on your home, otherwise known as equity. Read the rest of this entry »

     A commercial broker fee agreement contains details regarding proposed financing, compensation that is due to the broker and the fee charged by the lender. It also contains the non-circumvention clause that prevents the borrower from circumventing the broker and applying directly to the lender who has accepted the broker’s loan application for the same. Provision for the arbitration of disputes and other borrower covenants constitute an important part of the commercial broker fee agreement. The borrower is informed of the broker’s limitation with respect to procuring a commercial loan at the best rate of interest, since this is contingent on the borrower’s credit score, credit history, marketability of the mortgage title and the authenticity of the documents handed over to the broker by the borrower. The broker is entitled to verify the borrower’s credit score, credit history, business income, assets and other documents as deemed necessary.

     The commercial mortgage broker fee agreement outlines the compensation, that is due to the broker, for helping the borrower procure a commercial mortgage loan for the property under consideration. The broker is entitled to a processing fee that is non-refundable, irrespective of whether the proposed transaction is completed. The fee is payable to the broker once the lender agrees to finance the property in accordance with the terms laid down by the borrower.

     The broker is also entitled to a commission, that is calculated as a percentage of the loan amount, irrespective of the closing costs or points paid to the lending institution. Considering that the borrower pays points for procuring the loan, at a favorable rate of interest, it’s only fair that the broker’s commission should not be influenced by the decision of the former. This agreement also ensures that the broker does not lose his/her share of the commission if the borrower fails to appear at the closing, despite the lender agreeing to close escrow. For more on commercial mortgage, one may refer to articles on commercial mortgage lending.

     Although, the broker is allowed to work with other co-brokers and share the commission as deemed appropriate, the borrower cannot evade brokerage by working with a co-broker or with the lender who has accepted the broker’s loan application. The borrower is not allowed to fill out another loan application or withdraw the original loan application without prior consent of the broker for a period of 36 months from the date of the agreement. Else, the broker is entitled to the full amount of commission regardless of whether the borrower actually procures the loan.

     It is evident that a commercial broker fee agreement needs to be detailed and plug all the loopholes that may allow the borrower to evade brokerage. It would be prudent to consult an attorney who is knowledgeable about commercial mortgage transactions for further details.

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