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Aside from traditional funding sources from SBA loans and venture capital firms, there is a range of other, less traditional financing alternatives available to entrepreneurs.

Real Estate Financing

Many companies are not aware that their real estate is not fully leveraged. Banks prefer to make loans against land because they are more comfortable placing a value on it. Check the real estate section of the Sunday paper to find mortgage brokers in your area.

Equipment Financing

When purchasing expensive capital equipment, a company often has the opportunity to finance the purchase, or enter into a lease. In both cases, money becomes available, and the company gains the ability to use the machinery without sacrificing its cash position.

Many banks and manufacturers are willing to finance the purchase of capital equipment. They will lend your company money against the value of the equipment purchased, holding the equipment as collateral. The downside of this approach is that the loan appears on your balance sheet, affecting your company's leverage and your ability to borrow against the value of the company.

Leasing is an increasingly common method of financing. In this situation, the company never takes title to the equipment. Instead, the leasing company purchases the equipment and leases it to the company for a monthly fee. There are two significant advantages to this arrangement: the company doesn't need to dispose of the equipment at the end of the lease, and the lease is off balance sheet, meaning that since there is no loan, a company's debt load is not affected.

Customer Financing

If your product or service is valuable and difficult to replace, many of your customers may be interested in financing your growth. This can be a risky, time-consuming method of finding financing, but if the proper match is made, both parties can benefit.

Receivable Financing

Short-term revolving financing is provided by factors or receivable lenders. These firms recognize your receivables as a valuable asset, and are usually willing to lend against it, regardless of your company's financial position.

Factors will purchase your receivables (at a discount) and collect the money from your customers directly. For example, if a company sells $500,000 in software to a distributor like Tech Data, a factor might pay $400,000 for the receivable. It is then up to the factor to collect the entire invoice directly from Tech Data.

A receivables lender will loan money against the invoice and hold it as collateral. Once the invoice is paid, your company repays the lender. Check your local yellow pages under "Factors," or the Corporate Finance Sourcebook for firms that offer this service.

Venture Capital Clubs

These clubs bring small investors together with entrepreneurs in search of capital. These small organizations make it easy for a company to speak directly to a motivated lender. The downside is that these are people lending their own personal funds. For a more complete listing of venture capital clubs, contact (preferably by mail): Association of Venture Clubs, 265 E. 100th Street, #300, P.O. Box 3358, Salt Lake City, UT 84110. Phone (801) 364-1100.

 

Venture capital clubs alphabetized by state

Birmingham Venture Club
P.O. Box 10127
Birmingham, AL 35202
(205) 323-5461
Orange Coast Venture Group
c/o American Accounting
23011 Moulton Parkway, F2
Laguna Hills, CA 92653
(714) 859-3646
Community Entrepreneurs Organization
P.O. Box 2781
San Rafael, CA 94912
(415) 435-4461
Connecticut Venture Capital Fund
200 Fisher Drive
Avon, CT 06001
(203) 677-0183
Gold Coast Venture Capital Club
5820 N. Federal, Suite 4
Boca Raton, FL 33478
(407) 997-6594
 Florida Venture Group
2838 Kansas Street
Oviedo, FL 32765
(407) 365-5374
Venture Club of Iowa City
First Capital Development
325 E. Washington
Iowa City, IA 52240
Louisiana Seed Capital
339 Florida Street, Suite 525
Baton Rouge, LA 70801
(504) 383-1508
Greater New Orleans Venture Capital Club
301 Camp Street
New Orleans, LA 70130
(800) 949-7890
Southeastern Venture Capital
The Meyering Corporation
20630 Harper Avenue, Suite 103
Harper Woods, MI 48225
(313) 886-2333
 New Enterprise Forum
211 E. Hebron, Suite 1
Ann Arbor, MI 48104
(313) 665-4433
Montana Private Capital Network
7783 Valley View Road
Poulson, MT 59860
(406) 883-5470
Grand Island Industrial Foundation
309 W. Second Street
P.O. Box 1486
Grand Island, NE 68802
(308) 382-9210
Venture Association of New Jersey
177 Madison Avenue, CN 1982
Morristown, NJ 07960
(201) 267-4200, ext. 193
Long Island Venture Group
C.W. Post Campus
Long Island University
College of Management, Dean's Office
Worth Hall, Room 309
North Boulevard
Brookville, NY 11548
(516) 299-3017
New York Venture Group
605 Madison Avenue, Suite 300
New York, NY 10022
(212) 832-7300
Westchester Venture Capital Network
c/o Chamber of Commerce
222 Mamaroneck Avenue
White Plains, NY 10605
(914) 948-2110
Greater Columbus Chamber of Commerce
Columbus Investment Interest Group
37 N. High Street
Columbus, OH 43215
(614) 255-6087
Ohio Venture Association
1127 Euclid Avenue, Suite 343
Cleveland, OH 44125
(216) 566-8884
Delaware Valley Venture Group
1234 Market Street, Suite 1800
Philadelphia, PA 19107
(215) 972-3960
Mid-South Venture Group
5180 Park Avenue, Suite 310
Memphis, TN 38119
(901) 761-3084
H Houston Venture Capital Association (HVCA)
ATTN: Sally I Evans, APR - Executive Director
P.O. Box 56644
Houston, TX 77256-6644
Phone: (713) 660-7990
Fax: (713) 663-6542
Mountainwest Venture Group
6952 S. 185 W, Suite A
Midvale, UT 84047
(801) 561-9596
Northwest Venture Group
P.O. Box 21693
Seattle, WA 98111
(206) 746-1973