The process of raising capital or obtaining credit is quite daunting for entrepreneurs and commercial real estate developers alike. The new crowdfunding regulations make raising up to $75 million more efficient and (potentially) more certain, but the overall requirements remain the same.
Focus on Have Done, Can Do & Will Do Elements of Capital Financing
Companies, developers and entrepreneurs are successful in obtaining capital investment when they demonstrate a value proposition that, all other things being equal, would be reasonably expected to generate an attractive capital gain.
The demonstration of that value proposition is what is known as “due diligence” and it takes three (3) general formative stages of activities into account. These activities can be used to understand the process (schedule), progress (degree of completion) and outstanding requirements (costs).
Have Done Due Diligence
If you are seeking capital financing you are required to demonstrate the existence of your value proposition that supports the business deal governing the financing you are proposing to the capital markets.
Words aren’t going to be enough. You have to demonstrate the independent due diligence you “have done” that shows prospective investors or lenders independent experts have reviewed the value proposition and, all other things being equal, have found it to be sustainable.
Can Do Due Diligence
A value proposition can only become reality if the party offering the business deal (your company or self) can demonstrate the legal capacity to enter into a binding contract.
“Can Do” means you “can do” the capital raise based upon the demonstrated legal capacity of your company, as evidenced by your organizational documents, corporate resolutions and attending legal opinions.
A lot of support work goes into this stage, but it is the one stage where many entrepreneurs and developers get frequently hung up when someone says, “I’m in, what paperwork do you have for me…”, and then it gets embarrassing.
Will Do Due Diligence
The final stage of the process is demonstrating what the business “will do” – as in how the proposed value proposition that attends the business deal is intended to be produced. This is the offering itself and its attending documents that include: (1) offering circular; (2) subscription agreement; (3) escrow agreements; (4) vetting program documents; and (5) regulatory filings. Once this work is completed, your offering of securities or loan package, as the case may be, is ready for heading into the market or closing.
More information is available by contacting our offices during normal working hours.
