Brief summary: It takes money to make money! There are costs to be covered by contractors looking for big amounts of $$$. Be prepared for what is a fair cost and what is not…
“It takes money to make money” is very relevant when it comes to raising millions of $$$ for a new business. There are very real costs involved in creating that winning business you have in mind. You will soon discover that the costs of hiring professionals to work on your new project require a lot of money, unless they are shareholders… You also have the long list of licences, permits and approvals that you will normally need to acquire. It may feel like you are paying a lot of money. But that’s part of the cost of securing your financial future: These things are necessary, and they cost money.
It’s also true that when it comes to raising money from investors, you have the costs of getting your business to have a high-quality business plan, cash flow forecasts, and some basic business models to prove it’s solid and ” bulletproof” under changing conditions. . There are also some financial advisors who can guide you through the application process with an investor. If they are experienced and capable, they should know what the investor needs to feel confident investing in you and your project.
Without a good business plan, you won’t be able to speak face-to-face with the investor to make your presentation. Many aspiring business developers later discover that approaching an investment source also costs money. A broker should only charge for success: a commission when you settle the financing for him.
Be careful and check everything. Since the global financial crisis, a great deal of capital has been destroyed, severely limiting the ability of banks and other financial institutions to finance investment. Be as wary of ‘big names’ as those you’ve never heard of… The company you’re targeting may have been an active investor in the past, but check how much they’re currently investing…
However, an investor may also want to be paid for applying. This is valid, because they need to know who you are and if you are ‘solvent’.
Investor due diligence costs you money, and it can be quite a bit of money. If the investor does not live in his country, he will want his people to travel to do on-site inspections, face-to-face interviews with everyone associated with the project. They have to. it’s unavoidable. If he’s been working with good people, who can deliver, then they’ll need to work 12-16 hour days on due diligence and avoid parties and girls. The other guy you don’t want to get involved with…
The overall budget for the application process should be about 0.5% of what you are looking for. So if you’re asking for US$50,000,000, that would imply costs of around US$250,000 across the entire process, application and investor due diligence.