Create a couple of millions if you don’t have them!

If you are broke and you need a couple of millions for a new business idea you have, then I have news for you.

Find someone looking for finance, secure a guaranteed deal and an exclusive deal and sell the exclusive deal forward to real investors (with cash) for 30% less than you got through negotiation.

Example:

Business ABC is looking for $10 Million for business expansion. You see this and you decide to email the company saying something like this “I want to finance the whole amount of $10 Million. Let me sign an LOI (Letter of Intent) and let us then negotiate about a guaranteed return year 5″.

Not every company will say yes to this. But some will. In this case the company says yes.

So you sign an LOI that takes up the whole capital raising time the company has agreed upon (hence making this deal exclusively yours. You shut everyone out. Important). When that is done you ask the company to give you a guaranteed return of 20% annually, accumulated over 5 years (hence paying you your initial capital back + 100% in capital gains year 5). The company thinks that projection is realistic so they agree to this.

So you shake hands on this. But before you ask them to draft an investment agreement you ask them wait a week so you can arrange the financing needed to secure the deal (sometimes investors need to borrow money from the bank to secure a deal like this. In this case it would make sense to pay say 5-6% annually on $10 Million if you had a guaranteed return year 5 of 100% plus initial capital back).

During that week you go out and start looking for investors using the company ABC’s prospectus as presentation material including the deal you have secured for them.

This is what you say to investors “I have a deal here that requires $10 Million and it pays an accumulated interest of 20% annually over 5 years. Essentially giving you your initial back + 100% capital gains in year 5. All guaranteed by the current owners and the Board of Directors.

I have an exclusive hold on this whole deal and I am willing to give you the opportunity to buy me out at a price of $14 Million essentially giving you a chance of making a 60% return over 5 years (12% ever year)”.

As you see: I create a deal that gives company ABC the money they need, give the investors a guaranteed deal they most likely want (who doesn’t?) AND I recieve $4 Million myself for just passing along the ball to the investors who will work the legals with company ABC themselfs.

These $4 Million is money I can use to start my business.

Sometimes you need to do unconventional, though legal, deals to get money to start you dream business venture. Sometimes you need to think bigger and go bigger in the beginning in order to go small later. Does that even sound sane:)? I don’t know, but I do know this works. I do this from time to time when I lack capital and that happens sometimes when your capital is tied up and you can’t get capital the conventional way (through banks or your own capital stash).