20 Tips for Finding Money Now

Public Equity

15. Investmentor commercial-banking links can come in handy in an economic environment like this one, in which public-equity offerings can be on-again-off-again on a fairly unpredictable basis. Here's one way to protect your company's short-term interests: If you hook up with an investment-banking or underwriting firm that is affiliated with a commercial bank (the way that Salomon Smith Barney and Citibank are, as part of the newly christened Citigroup), you and your advisers can plan for an either-or scenario. Take the company public, certainly, if the markets happen to cooperate. But if recent deal valuations drop below an acceptable level, or investor interest in your industry begins to look shaky, then your banker can use his or her influence within the organization to negotiate an interim line of credit (think bridge loan) to tide you over until an IPO can squeak through.

That strategy gained credibility during the fourth quarter of last year. This year marketplace pressures should force all the big underwriters to come up with some alternative like it--even if that means an independent player like Goldman, Sachs needs to ante up its own bridge loan when deals get put on hold.

Corporate Support

16. Strategic partnerships aren't just a much-talked-about trend; they're the best alternative for many companies that find themselves either shut out of traditional financing deals or unwilling to swallow the equity valuations or interest charges required to make those deals happen. Cash infusions connected with strategic partnerships are usually much smaller than they might have been with a traditional financing deal (and sometimes investments aren't a factor at all). When a partnership's synergy clicks, however, the resulting growth can often yield far greater capital options later on.

International Finance

17. Financing international accounts receivable makes a lot of sense for U.S. companies hoping to shelter their cash flow from volatility abroad. Two time-tested methods still work well: international factoring deals, for companies that are willing to pay a fee in return for quick cash infusions without the hassles of collecting receivables; and letters of credit. One caveat here: given the severity of economic problems in some regions--especially in countries like Brazil and Russia--it has become more important than ever to verify the soundness of banks issuing the letters of credit, as well as the financial health of your customers. Rely on your international accounting or legal experts or on your domestic banker for assistance on this one. You (or your foreign customers) may also want to check out a new twist on letters of credit. Some financing institutions will guarantee your company payment within a relatively short time while offering your customers the opportunity to extend their payments for several months or longer. Again, ask your international advisers for leads to reliable financing institutions.

18. International strategic partnerships can pick up the slack for companies whose bankers have gotten anxious about funding corporate activities abroad, especially in emerging markets. An outright infusion of capital from a corporate partner never hurts. Neither does a well-timed introduction to an international banker or private-equity firm that may view your risk/reward ratio more optimistically than cautious U.S. lenders do. Finally, if your company--like many--will need to devote more attention to minding cash flow in 1999, it may help to have a corporate partner in key regions helping you negotiate payment terms and collect receivables promptly.

The Right Contacts

19. Capital intermediaries have been around a long time, and we're the first to admit that they're a mixed bag. Still, a skillful intermediary with valuable contacts at a wide range of capital sources can be, simply, the best friend a business owner has. But do your homework. Talk to absolutely every businessperson you respect (including your team of advisers) and ask each one to recommend an intermediary who typically handles companies similar to yours in size and industry.

When you've generated a short list, ask each intermediary for 10 business references, including satisfied customers, bankers, lawyers, and so forth. Make sure the references include names you recognize (and don't hesitate to check out any that strike you as dubious). We'd like to recommend that you stay away from intermediaries who charge up-front fees, since that's a typical scam technique, but we won't because there are some very credible and successful intermediaries who insist on them.

20. Entrepreneurship programs can be a great way to build valuable financing contacts while also enhancing your business savvy. But you've got to be picky. Two examples of these programs at their best: GE Capital Small Business College, based in Stamford, Conn., runs miniprograms several times each year and can be a great way of introducing small-business owners, especially women and minorities, to its vast array of financing operations; and (at the other end of the spectrum) the in-house entrepreneurship program recently launched by Weiss, Peck & Greer Venture Partners, in San Francisco, which allows a select few to observe the venture-capital decision-making process firsthand (and with any luck improve their prospects for raising financing down the road). Some of the programs are well publicized; others operate on a strictly who-you-know basis. Lawyers, accountants, bankers, and financing intermediaries should be good sources for leads about the programs.

Jill Andresky Fraser is Inc.'s finance editor.

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