A Hitchhiker's Guide to Capital Resources

FACTORING
Factoring--basically, an arrangement in which you raise cash against the value of your receivables for a hefty interest charge--can be a costly means to raise short-term capital. But since it's undeniably an option, especially for those companies that can't raise funds from banks, it makes sense to educate yourself. Unfortunately, there's not much available on the subject. But we can recommend pages 41 through 45 of Finding Money: The Small Business Guide to Financing , by Kate Lister and Tom Harnish (John Wiley & Sons, 800-225-5945, 1995, $17.95). The authors explain different types of factoring arrangements and include a valuable list describing some typical factoring-company policies. If nothing else, that list could help you comparison shop for better terms.

FAMILY AND FRIENDS
If your company is so new or so small that your only hope of attracting outside investors is to hit up your relatives or buddies, tread carefully. Start Up Financing: An Entrepreneur's Guide to Financing a New or Growing Business , by entrepreneur William J. Stolze (Career Press, 800-CAREER-1, 1996, $16.99), offers some good advice on this topic. For a sobering look at the emotional complications of borrowing from your parents, read " The Parent Trap," Inc.'s October 1990 cover story. If you decide to go forward anyway, you'll find a practical tip on structuring those deals in " CEO's Notebook" in the March 1997 issue of Inc.

GOING PUBLIC
There are plenty of good, well-balanced guides that discuss raising capital through an initial public offering. But remember, if your accounting and legal firms are well versed in serving the entrepreneurial community, they should be able to provide you with plenty of resources (human as well as written) to supplement whatever reading material you find on your own.

If you're just looking for a really quick introduction, a good place to start is with Arthur DeThomas's book Financing Your Small Business (listed above). It certainly isn't the only guide worth considering, but we do like its concise, easy-to-scan approach. You can learn a lot in its well-written 14-page chapter on going public.

For a quirkier exploration of the whole process, we'd like to recommend a short play (yes, play) written by two lawyers, Lloyd E. Shefsky and Misty S. Gruber. The two felt that they needed a more humorous and accessible approach for conveying technical IPO information to their clients. While the title, Prospectus Perspective: Private Deliberations About Going Public, is hardly catchy, this offbeat document has a great deal to recommend it, including some fairly realistic discussions among its characters about whether to hire a top-tier accounting firm ($9; not available in stores). To order a copy, write Lloyd Shefsky, Shefsky & Froelich Ltd., Suite 2400, 444 N. Michigan Ave., Chicago, IL 60611; call 312-836-4001; or fax your order to 312-527-9931.

Would you love to sell stock to the public but can't get Wall Street's big players to give your company the time of day? Then you might decide to investigate the direct-public-offering option. Your accounting and legal advisers should be your first source of information on this one. But for an overview of the subject, look up " When Mom and Pop Go Public," in the December 1996 issue of Inc.

Still interested? Then check out Direct Public Offerings: The New Method for Taking Your Company Public, by lawyer Drew Field (Sourcebooks, 800-432-7444, 1997, $19.95). DPOs aren't simple, so it pays to devote serious attention to chapter 5, "How to Do a Direct Public Offering." There's also a good chapter about selling stock through the Internet, and chapter 8 includes some fascinating case studies.

LEASING
Savvy entrepreneurs know that leasing equipment can sometimes alleviate cash-flow pressures. If you're contemplating a leasing arrangement, the Internet is worth browsing, if only to give you the broadest possible list of contact names. But if you're also seeking to learn more, try www.bworks.com/funding. Our favorite feature there is a glossary of typical terms involved in leasing deals.

PRIVATE PLACEMENTS
If you're planning to raise capital through the private sale of equity or a debt-and-equity package, then you'll be conducting a private placement whether you think of it in those terms or not. To do a substantial private placement, you need the right team of financial advisers--but don't go into one of those deals without doing some self-education, too. How to Finance a Growing Business: An Insider's Guide to Negotiating the Capital Markets, by investment banker Royce Diener (Merritt, 800-638-7597, 1995, $24.95), is quite informative, especially in a chapter that describes types of private placements and typical components of those deals (such as sinking funds, kickers, convertibles and--well, now you see why you need to read a book on the subject). Raising Capital: How to Write a Financing Proposal, by business consultant Lawrence Flanagan (Oasis, 800-228-2275, 1994, $19.95), is light on other details but offers a good sample private-placement circular. Finally, to get a good sense of how exhilarating, exhausting, and complex the financing experience can be, read Inc.'s October 1996 story " The Deal," an account of one company's odyssey through a private placement.

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