Let's face it! The average American entrepreneur isn't going to see a penny of the hundreds of the billions of dollars given to well connected conglomerates that benefit from the "trickle up” economics we are now seeing.
So the small businessperson, requiring working capital to meet company needs, to expand and to retire debt, inevitably will turn to the local bank, and try to borrow money.
The ‘bankster’ will ask for his personal financial statement, his social security number, his date of birth and run a credit check on him. Even if the entrepreneur has a separate entity and is incorporated, the entrepreneur will be asked to personally guarantee all loans the corporation is going to have, if he or she even gets the loan.
The corporation will be required to do its banking at the lending bank, and grant the bank a security interest in the bank amount and all corporate assets, and perhaps even some of the entrepreneur's personal assets, i.e. his home.
The interest payments may be so high, depending on the circumstances, that they make it impossible for the entrepreneur to make a profit. If the business does not do well, the entrepreneur will very possibly face personal financial ruin.
It doesn't have to be this way.
Virtually every company that has become large and successful did so because they sold shares of stock to investors. This process means no loans to repay, no personal guarantees, no interest payments and no bankers hovering over your company telling you what to do.
Most new businesses die within the first two years, usually because they are undercapitalized. The odds are, that if you're like most entrepreneurs, you don't have the working capital necessary to see your plans come to fruition and using "OPM”, other peoples' money, is vital for your success.
Raising money by selling stock is hardly a new concept, having been around for centuries. In modern times if we examine the inventions that have been making the most dramatic impact on our society, from the automobile to the birth control pill (Syntex) to the copier (Xerox) the instant camera (Polaroid) to the telephone….they all blossomed when they decided to "go public."
More companies don't do it because the process is expensive and complex.
But if one is truly serious about making a success out of business, there well may be no alternative. This is understood by business people and governments the world over.
Some public company founders will tell you that having a public company is almost like having a printing press to print money, because their stock become like a kind of
‘super-currency’ which can be used to trade for other assets, or even other companies.
It is noteworthy that the countries that were once communist, now have stock exchanges. Vietnam, China, Russia, Hungary, Poland, even Mongolia….and others have switched from state ownership to encouraging the entrepreneur to use the public markets to grow.
The process is not only for the giant companies. Both federal and state laws allow for small offerings at reduced levels of expense and complexity.
Business people with serious plans for growth and expansion are welcome to contact the author to discuss their ideas.
The author, a Boston area lawyer, recently founded Allerton Hill Advisors to promote emerging companies and to provide other services for entrepreneurs. See his website at www.goingpublicusa.com. Email him at firstname.lastname@example.org
Lawyer and Business Consultant