Need Investors, Financing, or extra cash?

[paul2145r]

The search for funding is one aspect of the business process that most entrepreneurs will have to endure. There are always new costs coming up, and less and less money available to help cover them.

I have been looking into various methods of alternative financing, and have come across a fairly good solution: International Investments. A number of my sources overseas have a great deal of experience in dealing with not only the small-business investment sector, but also dealing with larger investment firms and Banks. They have made mention that international investors are very interested in investing in US-based business and real estate. Since the dollar has 'fallen' and the real estate industry has become a buyer's market, it is in their best interests to aid small businesses. On the opposite end, the US business sector can definitely use a heavy influx of foreign funds.

Borrowing from a bank is often the last resort for entrepreneurs. Often it is a better solution than seeking outside (equity-based) investment. Rather than paying out dividends and giving away a large portion of your profits (provided that you make a profit), you will be responsible for a payment with interest. Many people don't like risking their own credit rating or personal equity, but end up paying out much more by taking on 'silent partners' and angel investors. For those of us that know how banks function, we know that it is in their best interest to loan out money. They get their money back with interest, and are protected by a myriad of laws.

Well- foreign banks are just as interested in loaning out their money... To US businesses! The United States has often been hailed as the forerunner of the entrepreneurial movement, with the best track record in the world (thanks to Microsoft, Apple, Google, Yahoo, MamaBell, PapaBell, and just about every other tech-based venture other than Nokia and Sony). With a potential for success being much higher than domestic ventures, many foreign banks are more open on risking their funds for small US businesses and entrepreneurs. It also helps when you know the banks' Directors on a personal level

If you are interested in seeking this type of investment/financing solution, feel free to give me a PM. I'd be happy to help put you in touch with the individual I have been speaking to concerning international funding!

One Note, however: -- Be ready to provide a good business plan for review. While they are interested in US businesses, foreign investment sources are usually fairly strict on what they want to see to qualify for investment.

[rogercbryan]

Paul, what is the benefit to getting money from overseas instead of from US Banks? I read your post twice and I'm not sure if I missing something. Will they loan money at rates lower then current US Rates? Will they give uncollateralized (spelling?) loans with out taking ownership in the business? Please explain as it sounds like an interesting idea.

[BusinessAdviser]

At least one issue that I see is the currency exchange rate. If repayment is to be made in dollars, wouldn't the banks avoid loaning the money during these times of dollar depreciation? If repayment is to be made in foreign currency, wouldn't Americans avoid borrowing the money during these times? With the exchange rates fluctuating so much, someone has to take on this risk. Who does it in this situation that you propose? Thanks.

[jasaunders]

A lot of questions to be answered, good points Jonathon.

Maybe the exchange rate is tied to the interest rate given for the loan; an adjustable rate tied to both libor and exchange rates, or something like that.

I didn't clearly understand the original post though either as to the advantages of using foreign banks over domestic banks, unless the only point he was making is that there is less money available domestically.

[BusinessAdviser]

A lot of questions to be answered, good points Jonathon.

Maybe the exchange rate is tied to the interest rate given for the loan; an adjustable rate tied to both libor and exchange rates, or something like that.

I didn't clearly understand the original post though either as to the advantages of using foreign banks over domestic banks, unless the only point he was making is that there is less money available domestically.

Regardless of what the interest rate is tied to, unless someone is entering forward contracts in order to hedge any losses, then someone has to take on that exchange rate risk. I don't know anything about these opportunities, so I'm wondering who takes on that risk.

[paul2145r]

I apologize for not fully clarifying.

For many entrepreneurs, particularly younger ones, it can be difficult to find funding for new ventures. In the US, one must have an excellent Beacon Score/Credit Rating to qualify for a loan. For many overseas banks, the US-based credit rating system does not exist. This gives entrepreneurs with past 'problems' a chance to receive funding for their business (provided they have some sort of track record and a clearly-defined business plan).

There are various measures and alternatives that they possess to hedge against inflation in currency. I will speak to a few of their representatives to learn more about the methods, but I am pretty sure that the money is loaned out in whatever currency is required, with a comparative placeholder on the most stable currency in the domestic nation (probably Euros).

[rogercbryan]

So these types of loans would be most beneficial to those who can not secure normal funding from US Banks. This makes sense and is a good product (strictly from an availability point of view). Any type of second tier funding system is good for start-up companies. If you are truly passionate about what you want to do and you have exhausted all US Based Resources (and there are a lot of them) then this could be an option.

Notice I made no mention of exchange rates and/or interest rates. These are very important issues that I do not feel qualified to discuss.

[jasaunders]

My guess was that the risk is taken on by the borrower. But regardless, this may be an alternative funding source for those that have trouble getting it domestically; at least related to debt financing.

[paul2145r]

I spoke to one representative earlier this morning. The impression I got was that the banks overseas do not put much stock into the fall of the US dollar. While the dollar may be falling at the moment, it can very easily jump back up into higher regimes. Banks and investors generally maintain a divers portfolio. By spreading into a number of currencies, they are able to hedge against inflation of one specific currency. While the dollar has been dropping, the Euro has been rising, meaning that they will be making a profit regardless.

It is rather interesting learning about International Banking. It definitely helps provide a better picture of how globalization is taking the place of domestication and 'patriotism'. throughout the world. As much as people say that the United States is losing power in the global scale, it still maintains a strong grip on the economic front. Even though many of these banks, businesses, and individual investors live abroad, they are still willing to put money into US businesses for the sole fact that these businesses originate in the US.

[rogercbryan]

How would someone go about applying for this type of loan?

[paul2145r]

One of my business partners is making a trip to Europe in February to visit a number of the Banks and Investment Funds interested in working with American entrepreneurs. We are going over various business plans to see which would benefit from the involvement of an influx of funds from foreign sources. If you are interested in seeking foreign investment, feel free to PM me for contact information. We will need to go over your business plan with you to ensure that it will draw the requisite amount of attention for foreign investors.

[chuff1026]

build business credit
i think thats a nice alternative

[jasaunders]

I still don't understand the advantage of using foreign debt financing vs. domestic debt financing.

[paul2145r]

When you look at the bigger picture, which companies today are making use of foreign financing? Well, let's see...

CitiGroup, amidst facing a $10,000,000,000 loss, has taken on investments from foreign individuals and even foreign government-controlled banks. The second largest investment firm in the nation is making use of these resources. As cited in this article:
"...Investors include the Government of Singapore Investment Corporation Pte Ltd, the Kuwait Investment Authority, Prince Alwaleed bin Talal bin Abdulaziz of Saudi Arabia, former Citigroup chief executive Sanford Weill and other investors..."

The US Census Bureau has published a document detailing U.S. Businesses acquired or established by foreign investors from the years 1990 through 2006. As one can clearly see in this study, the amount of foreign entrepreneurs and investors bringing funding into this country has more than doubled in recent years (from $65,932,000,000 in 1990 to $161,533,000,000 in 2006).

A common misconception is that foreign investors and banks are only interested in large companies and corporations. Investors are interested in whatever will bring them a profit. Small businesses have been fueling the American economy since well before the days of the Tycoons and Monopolies. Companies that began with one or two people (Google, Myspace) end up rising above multi-national corporations employing thousands (and then end up becoming multinational corporations themselves!).

Many entrepreneurs have great ideas, but have trouble picking the "right one". More often than not, ideas fail, and track records (and credit scores) go down the toilet. What happens, however, when the entrepreneur that hit a streak of bad luck "makes good"? Those investors, business partners, and colleagues rise right along with them. Why would a foreign bank be interested in your plan to make yet another variation of an Acme widget? Because they want to be there with you when you rise to fame. They want to be the bank that you invest your millions in. They want to be the bank that is still standing strong when their national economy tanks.

Anyways, not sure if any of this makes any sense... I've got a cold, and am taking the medicine that makes you feel loopy.. In summation, however- I am simply trying to state that the money is out there for those of you that need it!