Tag Archives: funding4business

funding4business – 5 common mistakes in raising capital

The 5 most common mistakes made in raising capital.

Venture capitalists are professional investors that provide risk capital to start-up enterprises or to companies that are seeking funding to develop and expand their businesses.

Venture capitalists invest becausre they expect to earn a reasonable retun onn their    funds when they balance risk and return.

For the start-up there are the right and wrong ways to present your business opportunity.

Converserly, for the venture capitalist discerning how to go about finding the right opportunity to invest your funds is no simple task.

Michael Pratt, an experienced venture capitalist and faculty member of University of Maryland’s Master of Technology Entrepreneurship, outlines the five commomn mistakes made when looking for venture capital.

Inadequate preparation
You don’t want to be inadequately prepared for a meeting with venture capitalists. Everything needs to be tight and focused so that you can prove that your business enterprise will be successful and profitable.

Paralysis by analysis
You need to hone your story and present it succently so it addresses the major topics tha a venture capitalist is interested in. Focus and succint are critical.

Ignorant of investors needs
Investors have specific needs and information requirements. You must identify, understand and address these needs. Put yourself in the position of a prospective investor.

Shotgun approach
Randomly sending out your start-up proposal to many venture capitalists, does not generate success or the results. You need to spend time and effort to research the venture capitalists who may be interested in your proposal.

Poor or ineffective management team
The management team that you have to drive the new start-up is critical and most important factor to any venture capitalist. The right idea without the right tem will not succeed. The investor wants to be assured that you have the team to execute the business plan.


Michael Pratt Faculty Member – Master of Technology Entrepreneurship

University of Maryland | 2120 Potomac Building | College Park | MD | 20742

funding4business – why small business loan applications are rejected

Why small business loans are rejected

A comprehensive study done by the Graziadio School of Business & Management at the Pepperdine University in the USA, confirmed that:-

Approximately 29% of  small business loan applications were declined due to poor   quality of earnings and/or cash flow, and

Approximately 23% were declined due to insufficient collateral.

The complete breakdown of loan application rejection is as follows:-

Quality of earnings and/or cash flow 29%
Insufficient collateral   23%
Debt load   13%
Size of company   6%
Customer concentrations   6%
Insufficient credit   5%
Size or availability of personal guarantees 4%
Insufficient operating history   4%
Economic concerns   4%
Insufficient management team   3%
Weakening  industry   2%
Other   2%



funding4business – Goldman Sachs adopting Start-Ups’ tactics

Goldman Sachs Plans to Offer Consumer Loans Online, Adopting Start-Ups’ Tactics


Goldman Sachs’s push into lending is being led by Harit Talwar, a former top executive at the credit card giant Discover, who joined the bank last month. Credit Clarion Pictures
Goldman Sachs has spent 146 years largely as the bank of the powerful and privileged.

Now the Wall Street powerhouse is working on a new business line: providing loans that can help you consolidate your credit card debt or remodel your kitchen.

While the new consumer lending unit is still in the early planning stages, Goldman has ambitious plans to offer loans of a few thousand dollars to ordinary Americans and compete with Main Street banks and other lenders.

The new unit will offer the loans through a website or an app — functioning like a virtual bank in one of the oldest companies on Wall Street. Without the costs of bank branches and tellers, Goldman can lend the money at lower interest rates while still making a profit.

The company hopes to be ready to make its first loans next year, according to people briefed on its plans, who spoke on the condition of anonymity.

In devising its new strategy, Goldman is putting itself in league with start-ups that are similarly trying to use technology to disrupt the traditional business of finance. Unlike the media and retail industries, banking has been relatively slow to shed its bricks-and-mortar business model — a trend Silicon Valley and now Goldman are seeking to exploit.

But the new venture carries considerable risks. After the financial crisis, Goldman was vilified, accused of profiting while homeowners lost their properties to foreclosure. If the bank is too hard on its borrowers — suing a struggling family for unpaid debts, for example it could revive a popular image as a bank that earns profits at the expense of ordinary people.

The lending will also involve Goldman in a relatively risky business in which it has little experience, dealing with ordinary borrowers with limited financial cushions.
“Everything Goldman has done in the last 30 to 40 years has all been focused on the commercial side, or things that abut it very closely,” said Chris Kotowski, a bank analyst with Oppenheimer & Company. “I refuse to believe that hiring a couple of programmers and offering to make $15,000 loans online is a highly value-added banking strategy.”

Still, this new type of lending could help burnish the firm’s relevance to mainstream Americans.

The $840 billion consumer loan business is facing a shake-up as online upstarts like Lending Club, Prosper and even PayPal have begun offering small loans.
These outsiders have captured only a tiny slice of the market so far. But with their low overhead, they are convincing some analysts that they will be able to eat away at the businesses of old-school banks with the legacy costs of branches and tellers.
Jeffery Harte, a bank analyst at Sandler O’Neill & Partners, said, “Online lending has the potential to be quite disruptive to the way credit is extended.”

On Wall Street, Goldman has a reputation for spotting businesses that are being transformed and finding a way to seize the opportunity.

To the degree that Goldman can “assess the risk and price things electronically, it may be a low cost way of getting into the business,” Mr. Harte said.

The bank’s push into lending is being led by Harit Talwar, a former top executive at the credit card giant Discover, who joined Goldman last month.

In a sign of how seriously Goldman is treating the new venture, the company approached several top consumer finance executives about the job, which comes with the title of partner, a highly coveted position at Goldman, the people briefed on the matter said. The operation could have a staff of as many as 100 by the end of the year, they said.

Goldman declined to comment on the plan. But in a memo to employees announcing the hiring of Mr. Talwar last month, Goldman’s chief executive, Lloyd C. Blankfein, and its president, Gary D. Cohn, noted that “the traditional means by which financial services are delivered to consumers and small businesses is being fundamentally reshaped” by technology and the use of data and analytics.

Some of Goldman’s traditional business lines are under pressure. Sluggish markets and new regulations have diminished historically profitable areas like trading, forcing Goldman and other Wall Street companies to hunt for new sources of revenue.
Before the financial crisis, Wall Street firms were generally not permitted to do traditional consumer lending because they were not set up as federally insured banks. But as part of the government bailout in the 2008 crisis, Goldman and its archrival, Morgan Stanley, were required to become bank holding companies.

Since 2011, the two banks have talked about increasing their lending and have tripled the amount of outstanding loans — to $42 billion in the case of Goldman. Until now, though, they have focused on providing mortgages and credit lines to existing, generally very wealthy, clients.

With its new business, Goldman will take a very different approach, offering the types of loans that are traditionally pitched through mailing blasts to American homes.
The firm is probably going to focus on lending to customers who most likely would not come close to the $10 million minimum balance required to become one of Goldman’s private wealth clients. The loans would not be backed by collateral like a home or automobile, allowing Goldman to charge higher rates.

“When you are looking around at the universe of asset classes, there is still nothing better than unsecured American consumer debt,” said Nick Clements, a former banking executive at Barclays and Citigroup, who co-founded MagnifyMoney, a website that helps borrowers compare credit card and loan offers.

Goldman may eventually lend to small businesses, which have typically struggled to obtain bank loans.

The initial financing for the loans would come from certificates of deposit, which Goldman has been amassing in recent years. As the business grows, the bank may securitize the loans — bundle them and sell them to investors — to reduce some of the risk that it holds on its own books.

Goldman is still considering the details of the loans it will offer. In early discussions, the firm has been talking about making loans that would be about $15,000 to $20,000, people briefed on the conversation said. To distribute the money, Goldman is considering issuing a sort of prepaid card that could be drawn down each time the borrower buys something with it.

Goldman has not decided whether to attach its name to the loans or market them under another brand.

Consumer loans can be a fundamentally risky business even for a company with a reputation for deftly managing risk. Many people take out personal loans as a last resort to deal with cash flow problems at home or in their businesses.
“If you grow too fast in the personal loan business, you can get some bad surprises,” said William N. Callender, a managing director in the financial services practice of AlixPartners, an advisory firm.

Also, Goldman will have to overcome powerful forces that favor the incumbent Main Street banks. Even if Goldman can offer lower rates, consumers may still prefer credit cards to personal loans, simply out of habit.
“The biggest thing the banks have in their favor is inertia,” said Mr. Clements, the former consumer banking executive.

funding4business – Employee share scheme changes 1st July 2015

Changes to Aussie employee share schemes for start-up companies came into effect from 1st July 2015

Employee share schemes (ESS) provide an opportunity for employees to receive shares (or options to buy shares) in the company they work for.

The Australian government has made changes to the tax rules for employee share schemes to make it more attractive to employers and employees to participate, including a new concession for start-up companies.

Changes to employee share schemes include:

when options are taxed

increasing the maximum ownership limit to 10% of the total shares (up from 5%)

increasing the deferral period to 15 years (up from seven years) for tax deferred schemes.

Additional concessions for start-up companies
Under the new rules if shares are acquired in a start-up at a discount of up to 15% (relative to market value), then the discount is exempt from income tax. The shares will only be subject to capital gains tax on disposal.

What is a start-up?
Start-up companies, from any industry, need to:
be incorporated for less than 10 years
be an Australian resident company
have no equity interests listed on an approved stock exchange
have an aggregated turnover less than $50 million.

What you need to know?
The Australian government have published a guide for employers and standard templates for start-up companies to help you develop and maintain an employee share scheme. We have also developed a guide for employees to help them in making decisions to participate.

Find out more at:- www.ato.gov.au
Employee share schemes
ESS: Guide for employers
ESS: Guide for employees

funding4business – Instant tax deduction

Aussie small businesses – Instant tax deduction – asset threshold increase to $20,000 is now law

Small businesses can obtain an immediate tax deduction for assets acquired costing less than $20,000 purchased since 7.30pm 12 May 2015.

You can use the new threshold amounts in claiming deductions in your 2015 income tax return. The deduction is claimed in the income year in which the asset is first used or installed ready for use.

What’s changed?
The instant asset write-off threshold has increased to $20,000 (up from $1,000). This allows you to immediately deduct the business use portion of a depreciating asset that costs less than $20,000.

The changes apply to assets acquired after 7.30pm on 12 May 2015 until 30 June 2017,
on a per asset basis, so several assets each costing less than $20,000 would qualify,
to new and second hand assets.

Assets that cost $20,000 or more (which can’t be immediately deducted) will continue to be deducted over time using a small business pool.

The low pool value threshold will also increase to $20,000. This means that an immediate deduction is available if the pool balance is less than $20,000 at the end of an income year.

What’s not included?
There are a small number of assets that aren’t eligible for accelerated depreciation, for example horticultural plants that have specialised depreciation rules.

Record keeping
Just like any other business asset, you’ll need to keep records to support any claims for a deduction. This includes the ongoing business use of an asset and its eventual disposal. The ATO has a risk-based program to identify taxpayers that are not meeting their obligations and will take measured approaches to influence taxpayer behaviour.

Find out more at:- ato.gov.au
Growing Jobs and Small Business – expanding accelerated depreciation for small businesses

funding4business – real estate crowdfunding

Real estate Crowdfunding set to top US$2.5 Billion this year

Entrepreneur Magazine
Catherine Clifford – 4th March, 2015

Real-estate crowdfunding was a $1 billion industry in the USA in 2014 and is expected to grow to more than $2.5 billion this year, according to a report released today from USA industry research firm Massolution.

Across the globe, investors and homebuyers are using crowdfunding as a way to own and profit off of commercial real estate or to finance the purchase of their own homes. In 2014, USA crowdfunding campaigns ranged in size from less than $100,000 to over $25 million.

When most people think about crowdfunding, they’re likely to think of a group of friends pulling their finances together to back the launch of a new indie film or a wallet made out of duct tape.

While still emerging, the real-estate crowdfunding industry is growing quickly. To date, there are 85 real-estate crowdfunding platforms currently in operation, according to Massolution.

“Residential crowdfunding has the breakout potential, as mortgage loan origination, a trillion dollar market, is opening up to distributed platform financing,” the report says. One example of residential real estate crowdfunding is LendInvest, a platform out of the U.K. that did $240 million worth of residential mortgage loan initiations last year.
Property investors are using real-estate crowdfunding as an alternative way to invest money they are looking to make money with. For example, on USA platforms such as Realty Mogul, many investors pool their money to buy a commercial real-estate investment with the expectation that the rate of return on their investment will be higher, with less risk, than other typical investment alternatives.

The benefit of real-estate equity crowdfunding over real estate investment trusts, or REITs, which have already been around for two decades now, is speed and diversity. “Technology allows this activity to be conducted more swiftly and more efficiently, availing the investment opportunity to more participants,” the report says.

Crowdfunding for commercial and industrial investments is growing faster than it is for residential or multi-family real estate investments, according to the report. Still, crowdfunding is being used as an alternative finance method to a mortgage from a bank for individuals looking to move into their first home. And there is significant potential in this sliver of the real-estate crowdfunding market.

funding4business recognised this emerging trend into on-line and Internet based financial services and was specifically established to facilitate peer-to-peer start-up funding and business loans to Aussie businesses.

funding4business enables crowdfunded property investments – today

We are an Aussie company, with an Aussie team, applying Aussie developed technology and know-how, to an emerging P2P alternative investment and financial marketplace for the benefit of Aussie business borrowers and Aussie investors.

We connect business borrowers with investors such as SMSFs, HNWIs, SIVs and PIVs holders for their mutual benefit.

Peer-to-peer (P2P) lending acts as a flexible investment alternative where established businesses can borrow funds and negotiate business loans directly with willing investors at mutually acceptable investment rates, terms and conditions.

The funding4business marketplace is open and transparent, offers a broad range of investment options, provides flexibility, offers potentially better investment returns, faster and simple settlement, online registration and algorithmic loan matching to your investment criteria.

funding4business was launched in Australia on 1st August 2014.

London is the Crowdfunding capital of the world

Entrepreneurs 15/08/2014 @ 9:00AM
Jason Hesse Contributor

London has overtaken New York City and San Francisco to become the world capital of crowdfunding. Britain is home to around 80 different crowdfunding platforms, with the two biggest players by far Crowdcube and Seedrs.

At a recent event held by The Crowdfunding Centre in London, an interactive map showing crowdfunding’s spread and distribution was unveiled. London is the top city, with local businesses and start-ups creating more campaigns during July 2014 than any other city.

Just over 250,000 crowdfunding campaigns were launched internationally in 2014 with London leading the charge, with 12 new crowdfunding projects launching on average each day.

The average amount raised was $17,834, with an average fully-funded success rate of 32%.

Barry James, founder and CEO of The Crowdfunding Centre, attributes London’s lead to the city’s start-up community embracing crowdfunding as an alternative way to raise funds.

“It’s clear from the figures that the hyper-connectivity of the start-up community in London is helping. There is also the fact that compared to the US, where centres of excellence are scattered around the East and West coasts, London has become a centre of many specialisms.”

In particular, the data shows that London is a leader for crowdfunding projects in the business, technology, publishing and gaming industries – all fast-growth areas.

Discussing the findings, Dr Richard Swart, a crowdfunding and alternative finance expert from University of California, Berkeley, said the research findings come as no surprise: “London and the UK are continuing the growth documented in our research. It is becoming clear the UK is leading the market in many respects.”

The UK government is not ignoring this. George Osborne, the UK’s Chancellor of the Exchequer, said that the UK is ready to challenge US dominance in crowdfunding:

“We stand at the dawn of a new era of innovative finance. Setting the objective of the UK leading the world, London has become the world capital of crowdfunding. The technologies being developed today will revolutionise the way we bank, the way we invest, the way companies raise money. It will lead to new products, new services, new lenders.”

Britain is embracing crowdfunding and it has grown extremely quickly in the UK over the last few years, by more than 600% between 2012 and 2013, from just under £4m raised in 2012 to more than £28m in 2013.

This fast growth has caught the government’s attention, with the Financial Conduct Authority – the UK financial service regulator – releasing new rules to regulate both crowdfunding and peer-to-peer funding platforms.

Before the FCA’s rules, some crowdfunding activity had been unregulated, some regulated, and some of it exempt from regulation. These new rules were widely welcomed by crowdfunding platforms, making the model more accessible to everyday investors.

“[The UK] is the best jurisdiction for crowdfunding in the world,” says Jeff Lynn, the American-born founder of Seedrs. “The US and the rest of Europe are far behind the UK, which has a sensible regime that protects investors while still creating a commercial model in which to operate. Hats off to the government for their enthusiasm.”

Crowdfunding is not just happening in London it is taking off in Sydney.

funding4business the new peer-to-peer crowdfunding marketplace launched in Australia and New Zealand in 2014 and is the only platform designed to provide business loans, start-up seed and equity funding, and crowd-funded business loans to Aussie and Kiwi enterprises.

funding4business connects business borrowers to lenders and investors directly, by matching investing and borrowing criteria, which then allows businesses and investors to negotiate the terms and conditions of the loan or investment at mutually acceptable interest rates and repayment terms.

With the funding4business peer-to-peer marketplace there are no banks, no middleman and no hidden fees. Listing in funding4business peer-to-peer marketplace for both investors and for businesses seeking loans is simple, quick and free.

Release #5 is now live at funding4business.com.au

NEW! Start-ups seeking funding can now list in the marketplace

This method of peer-to-peer financing is for early stage equity investment in start-up enterprises seeking seed or establishment risk capital, especially in the technology sector.

NEW! Crowdfunders can now list in the marketplace

The CrowdFunding method of peer-to-peer financing is usually for established businesses seeking funding by pooling loan funds from a number of independent investors through peer-to-peer relationships.

As at today, we have 44 investors & businesses listed on our peer-to-peer marketplace with a total market value of $7,790,000

funding4business is an open and transparent peer-to-peer marketplace, where established Aussie businesses can source affordable business loans, crowdfunded loans or start-up funding from willing lenders and investors at mutually acceptable rates and loan terms.

Why were seed funding rounds down in USA in 2014?

The number of Start-up seed rounds in USA in 2014 were down by 30%?

On the whole, seed investment dollar value in 2014 looked very similar to 2013 but the number of deals dropped 30%.

This drop in number of deals, without a similar decline in investment dollars, indicates that the average seed round in 2014 was larger.

In turn suggesting the valuation or valuation cap of the average round increased.
And indeed, the average seed round rose 28% while the median rose 40%.

One theory:-

I read an article recently regarding the decline in start-up businesses in USA.
The nub of the article was start-ups of all types of businesses have been in steady decline for about 20 years in the USA. The author claimed this was due to:-

restrictive immigration laws keeping enterprising foreigners out of USA
regulatory restrictions – on options and share issues
caution and risk aversion of entrepreneurs
economic un-certainity from QE in USA, Japan and now the ECB
political gridlock in Congress

What has been the impact of interest rates on Start-up investments?

I suggest that:-

Since the GFC in 2008 the U.S. central bank’s reaction was to keep artificially low interest rates plus with the flood of $$ resulting from the 18 months of QE the country and world is awash with cheap money.

Therefore, investors’ are struggling to find decent returns in a low interest rate environment where money is cheap and undifferentiated. They will look at anything.

But their experience from the 2000 “dot.com” bubble and the GFC crash has made investors very cautious and not throw their money at high risk investments, i.e. a start-up with a great idea

So – why are fewer larger value deals are being done?

I suggest that:-
Investors are ignoring early stage start-ups and early seed $$ and waiting longer and avoiding or minimising the risk.

The hit rate with start-ups is very low – so investors are saying, “lets wait and invest bigger $$ in established enterprises”.

Which suggests that start-ups must be further along the establishment curve and have a better revenue and business story before investors will come in.

Plus a lot of new investment funds is being re-cycled by successful Founders who have exited and investors who have done well from previous start-up investments.

They are in the IT loop and only put funds in the main, into established proven start-ups and come in at Series A,& B rounds instead of seed rounds.

What to expect in Q1 2015?

I suggest that:-
The steep decline in the number of USA start-ups might be as a result of investors reacting to mounting concerns about investment risk and economic un-certainity.

This is due in part from the cessation of USA central bank’s QE activities and the start of QE activity in Japan and the ECB, will mean:-
more of the same, possibly a further decline in number of start-ups in line with the steady historic decline
less funds into early stage start-ups
more funds into proven or established enterprises.

PJM – 20th January 2015

Murray supports crowdfunding

Murray supports crowdfunding on Internet

The Murray financial system inquiry has rejected calls from some large banks that new digital and Internet based financial competitors should face the same regulations they do. The Murray inquiry said innovations that didn’t pose a risk to the financial system should have a lower regulatory burden, which “will allow innovation to come into the system.”

The Murray inquiry said technological change was transforming financial services quickly and could improve competition but also reduce it. Recent innovations include equity and debt crowdfunding and online business funding and lending.

funding4business recognised this emerging trend into on-line and Internet based financial services and was specifically established to facilitate peer-to-peer start-up funding and business loans to Aussie businesses.

We are an Aussie company, with an Aussie team, applying Aussie developed technology and know-how, to an emerging P2P alternative investment and financial marketplace for the benefit of Aussie business borrowers and Aussie investors.

We connect business borrowers with investors such as SMSFs, HNWIs, SIVs and PIVs holders for their mutual benefit.

Peer-to-peer (P2P) lending acts as a flexible investment alternative where established businesses can borrow funds and negotiate business loans directly with willing investors at mutually acceptable investment rates, terms and conditions.

The funding4business marketplace is open and transparent, offers a broad range of investment options, provides flexibility, offers potentially better investment returns, faster and simple settlement, online registration and algorithmic loan matching to your investment criteria.

funding4business was launched in Australia on 1st August 2014.