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Published: 21st February 2012
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(c)Dr. Jayson Caruso (Article #65)

This article addresses the key reasons why many of the small and medium businesses and entrepreneurs already have the perfect formula for raising equity capital. Not all small and medium business will meet the requirements for the proposed formula for raising capital. The ones that do not meet the requirements can qualify by registering with the appropriate SBA agency as described herein. During our research we found over ten thousands of these businesses in the small business administration data bases that meet the requirements.

Small Business Research Companies; These companies have golden opportunity for the future development of their products and growth of their companies. Through a two tier grant stage funding they receive seed grant funding. The phase one awards are for the periods of up to six months in the amounts up to $100,000.00. The follow-on second stage will vary from periods of up to two years in the amounts up to $1,000,000 depending on which agency is awarding the grants. These funds will give the business entity a head start by covering the cost to support the design and development of their products. Grant funding from one of fifteen major government agencies; Army, Air force, Navy, Marines, etc. Following the completion of stage two funding the small businesses are expected to obtain funding via the private sector for commercial use of their product and possible contract back to the initial funding agencies as well.

The Small and Medium 8a Minority Companies; These firms register with the government under the 8a program which is a contract preference program for up to five years. They receive preference (top priority) in the competitive bids over other small and minority businesses for contracts from prime and sub-contractors in all sectors of the government which includes non-governmental commercial contractors as well. This more or less guarantees that the firms under 8a registration program will have available cash flowing contracts over the next five years giving the basis for a head start in their respective business.

These two programs alone with some others are the most creative programs that have been in place for over fifteen years by the United States Congress. But due to the lack of knowledge and experience, the entrepreneurs are not very effective at leveraging these programs for the long term development of their business as a whole. The recent debate in congress (2012) whether to renew funding for the programs was recently passed by Congress and the Obama Administration and is still in place with an increase in the amount of grant funding for the research programs.

The small business owners and entrepreneurs usually drop the ball in their quest to follow-through on the start –up funding opportunities they receive through these grant programs. They have relied on the initial grants and contract opportunities and not made the effort to plan for the future funding of their company beyond initial government funding support. Research shows that a year or two after the funding cycle in either program the business is either gone out of business or barely struggling to stay in business. This a very sad commentary because not only the business owners lose but the tax payers loses as well. Lets take a look at the programs that are currently in place to assist in funding these businesses on a long term basis.

What does any business need to attract investors and or lenders? They need to show they have a viable corporation and business plan, contracts with cash flow, and the opportunity to compete for future contracts (this is the 8a program). Another key factor is a customer base for the products they manufacture. What can be better than to have a major government agency sponsor the development of the company’ s product which also turns out to be one of the customers to use the product. (The Small Business Research and Development Companies).

The companies that have the above status are at their peak to be able to seek new investment opportunities to grow their company to the next level. If they do not take advantage of the opportunity at the peak time of government support, they most likely are doomed to fail which many do. The obvious solutions is to go after Angel Investors and Venture capital which some do but not very successful at it. There is a formal step that must be taken just before seeking out these funding sources and that is to structure their company in a way to attract future investors to invest in their company. Investment transaction such as these the savvy investor looks for an exit strategy that will provide the icing on the cake and the motivation to invest with the company. The entrepreneur should consider structuring his/ her company as a public company to raise equity capital by selling stock in the company to the public. This is just what the mid-size and larger companies do and no reason why the small business cannot do the very same thing.

Many argue that it cost too much and require additional staff to support a public company. For the larger companies raising multi-millions, yes! but for the small companies no more than a couple of extra staff is required. There are programs and public vehicles(companies) for smaller companies to go public with the full effect of an Initial Public Offering(IPO) without the cost that the larger companies will pay in the amount of one million dollars or more up-front just to start the underwriting process.

One very successful program for raising equity capital is offered through the SBA is the Small Corporate offering (SCORE) where a small business raise equity capital in the amount of one million dollars per company in one year using their business plan and disclosures documents to sell stock to the public in the company with very little if any reporting regulations. Another is the 504 regulation “D” with very little reporting requirements. Another is the reverse merger process into an existing over the counter (OCCTB) public reporting shell company and can raise five to ten million dollars. Each of these programs are cost effective and inexpensive in regards to return on what it cost to participate. Most of the task can be out sourced to professionals to minimize the in-house personnel involvement which make for a turn-key operation. This article was written to highlight the available funding opportunities for the small and medium businesses which is much need to boost our economy for the long term. Contact the writer for the details and benefits of raising equity capital from doing a public stock offering using one of the above programs.

About the Author:
Dr. Jayson Caruso, is a Angel and Venture capital Investor. He has his MBA from Pepperdine in International Business Administration and PhD in International finance, over ten years as a corporate CFO and CIO with fortune 500 companies , as entrepreneur started a number of financial services companies and counsel to over 200 International developing businesses. Currently he is chairman of a International Savings and Loan with a multi-billion euro asset portfolio and is director of their boutique investment banking company. He counsels and mentors SBA funded companies in raising equity and debt capital on the U.S and Frankfort public stock exchanges. He has publish over 50 articles and two books on the subject of creative financing for small and medium business which is now listed out on the internet for review.
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Keywords: Jayson Caruso, small business finance, 8a small and minority business funding source, small business research funding source, small business financial consulting, public finance for small and medium businesses, equity funding for small and medium businesses, unsecure loans for small and medium businesses.

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