Project Funding Payments.

In the project funding world many entrepreneurs refuse to pay “upfront fees” towards their project. When you apply for debt funding, the funder may have to implement a financial structure to enable you to kick-start a project and as well to determine your ability to pay back the loan. Whilst it’s true that you may not have to pay an upfront fees, there are often associated costs involved.

Fees V’s Cost:

A fee is when you are asked to pay for the services of providers whether it be for the arrangement of the funding package via the intermediary or a fee levied by the funder themselves. This fee is normally levied at the end of the funding procedure.

A cost is something that can not be avoided. The money goes towards actual events such as purchasing a bank instrument on your behalf, blocking funds within a hedge fund, securing private equity money. All these incur costs.

What Is Included In The Cost?

Costs can include an array of things such as securing collateral. Let’s say you have a project which has NO collateral and is not yet generating any revenue. Generally funders/lenders protect the money loaned out by securing it against some kind of collateral. As a project which is at its beginning stages, they won’t have any collateral. It is quite common that funders will have to go and obtain external collateral by purchasing instruments to secure against the project.

Often this involves another corporate entity to pledge their assets against the instrument for 1 year and 1 day. You now have two parties at risk, the corporation pledging their assets against the instrument and the funder purchasing the instrument to lend against it – this incurs costs. Other costs can include 1) due diligence 2) to pay for flights for face to face meetings, 3) blocking money within a hedge fund, 4) securing funds from private equity investors, all of this incurs very real costs. Not to say that all companies have these costs.

Payments and Commission

Getting project funding can be quite ruthless. Please read your agreements and terms thoroughly when applying with brokers or lenders as it’s been known that some companies are charging ridiculous sign up fees, retainers, Skype call fees and an exit fee. All this can be legitimate however there are those funders out there who are just out to collect on the fees and very rarely bring any funding results. I’ve heard that some companies are charging 20K for just the sign up fee and exit fees can be costly making it difficult for companies to go elsewhere if they haven’t received funding within 12 months.

Although, happily living, in a particular house, requires far more than, simply, financial considerations, the reality, often, is, unless/ until, you can have the economic/ financing necessities, including the down – payment, and monies, needed for closing costs/ expenses, you won’t be able, to address these other requirements/ needs! After, over a decade, as a Real Estate Licensed Salesperson, in the State of New York, I have come to strongly believe, the more educated, and prepared, the potential, qualified, home buyer, the better, his decision – making ability, and, often, his happiness, with the overall process! One of these items, requiring attention, and preparation, is having the needed funds, for the necessary, down – payment, and other, related, closing costs. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 5 potential funding sources.

1. Friends and family: Perhaps, one of the single – biggest, sources for this funding, is your friends, and family! You probably know many homeowners, who derived much of their needed funds, from either one, or a combination of these sources! These are, generally, the people, who care most about us, and our needs, so, if they can. are often, willing to help, as best, their personal circumstance, permit!

2. 401(K); unions; etc: Unlike IRA’s, there are no tax penalties, when we borrow funds, from our 401(K) plans, for the purpose of a down – payment, on a house! Many labor unions, also, offer, plans, for their members, to help with these types of eventualities. Some employers have specific programs, designed to help, in order to inspire and motivate, employees, to remain loyal to their company. The key, is, to think, outside – the – box!

3. Personal savings: Long – term, financial planning, unfortunately, is rarely employed! With the power of compounding, and the concept, of, Periodic – Payment – Investing, those who have the discipline, focus, and commitment, as well as ability, to periodically, put aside specific funds, for this purpose, have accumulated the amount of personal savings, which might, make having this down – payment, available!

4. Sell financial assets: Some use other financial assets, such as stocks, bonds, and others, to accumulate the necessary funding, in a prepared way!

5. Differing percentage of down – payments, needed: Although, many believe, one must have 20%, to put down, the reality, is, there are many circumstances, when a lesser amount is needed. In fact, on average, the down – payment, is about 13%. However, one must realize, if you put less down, it will translate, to a higher monthly payment. This may cause other challenges, in terms of qualifying for a mortgage, as well as monthly financial stresses!

The bottom line, is, be prepared! The more you know your options, the better you can evaluate them, and do, what’s best, for you!

Pre settlement funding is one of two lawsuit settlement funding methods, in which a person who has filed a compensation case can get funding in the form of a non-recourse loan from a pre settlement funding company on the basis of his or her pending case. Even if the settlement or verdict amount is smaller than anticipated, the amount to be repaid never exceeds the amount of the injured person’s share of the verdict. Pre settlement funding involves financing of on-going litigation, rather than buying legal fees after a settlement. The risk is much higher in pre settlement funding than post settlement funding and therefore pre settlement companies expect a much higher return.

A plaintiff in need of money contacts a pre settlement funding company, sometimes on the suggestion of an attorney. The pre settlement funding company contacts the lawyer who is handling the case, and obtains information about the case. On the basis of this information, the loan company assumes the value of the settlement or verdict and offers cash advance to the injured person. The loan and associated fees are paid to the finance company when the case is settled.

For pre settlement funding, the verdict may take years, which substantially reduces the amount of money that the finance company can pay to the client. The pre settlement funding companies aren’t likely to offer funds to plaintiffs who don’t have strong cases justifying substantial awards.

For avoiding usury laws the funding from pre settlement funding companies are not described as “loans”, but as “cash advances”, “investments” or “venture capital”. Not every state permits pre settlement funding. The Ohio court prohibited pre settlement funding saying that the funding could create a disincentive to settle a case, where the plaintiff would have to pay the entire amount of the settlement to the finance company.

In the last article, we examined the historical pricing models in the lawsuit cash advance funding industry. We also discussed the business dynamics that often change pricing in any business which puts capital at risk for profit. Specifically, we mentioned how the settlement loan industry evolved from an enterprise charging as much as 10% per month as “interest” on lawsuit cash advances to a business where applicants are routinely “funded” for as little as 15% per six month period.

In this entry, we examine the costs associated with lawsuit funding and analyze them from the perspective of an applicant who is in dire need of cash for whatever reason. From this angle, we can more accurately assess the costs associated with this type of financial relief – only available for those who have a pending lawsuit.

Since every person’s circumstances are different, weighing the costs in obtaining a lawsuit loan or pre-settlement funding against the future proceeds of an individual’s pending case, can only be accomplished on a case by case basis. For this reason, perhaps the best way to illustrate the point, is to use a hypothetical example.

Lawsuit Funding Costs – Hypothetical Example

A 36 year old plaintiff in a lawsuit finds himself unable to work and support himself and his family due to injuries sustained due to the negligent driving of another individual. Since 2008, plaintiff has exhausted all other avenues for financial relief. He has borrowed money from his friends and family. He has taken a home equity loan against the value of his home. He has gone through his disability payments from work and the other “benefits” he receives do not cover his monthly expenses. He is currently 5 months in arrears on his mortgage and property tax payments.

Forced with an imminent foreclosure proceeding, this plaintiff’s options are limited. On the one hand, he can file bankruptcy, which could save his home but would ruin his credit rating for many years. He can hire an attorney for this but the attorney requires payment up front for his time and expertise.

Another option is to obtain lawsuit funding to help with his liquidity issues. Let us briefly delve a little deeper in the analysis.

Comparing Costs

We already discussed the costs associated with lawsuit cash advances. But what about the cost of not being able to pay bills on time, or at all? We may not be able to quantify the costs exactly, but we can at least identify some potential problems. For example, defaulting on a mortgage could result in the following “costs” for the homeowner.

1. Removal from the Dwelling. The defaulting party must then find shelter. Normally, a rental unit requires first and last month rent plus a security deposit. That is three months rent up front from the new tenant. Of course, if the person has three months rent, he would probably be able to at least delay the foreclosure process. So there is a liquidity problem on top of the existing problem. One can easily foresee multiple “costs” associated with being removed from a place of residence (e.g. moving costs, additional fuel expenditures, storage fees, etc.).

2. Destroyed Credit Scores. Like it or not, this country operates on debt. Who is indebted to whom is the oldest and arguably the most profitable game in history. Access to credit is an integral part of the game and are a function of credit scores. Obviously, a mortgage foreclosure would severely hamper a person’s access to credit for car loans, future home purchases, appliances or even credit cards. Further, even if credit is offered, the interest rates charged will be far more than otherwise would be required. Above are simply two “costs” facing the person in our example.

Conclusion

When thinking about the above, it is helpful to weigh the long term effects of these events. The real problem is how to accurately assess the cost and compare them to obtaining a lawsuit cash advance funding against a case. Ultimately, the analysis depends on individual circumstances. Fortunately, the lawsuit funding business exists for those persons who make the analysis and choose lawsuit loans as a possible solution. Thousands of people make this choice each and every day. Thank you for your interest in the pre-settlement loan business.

Startups have changed the way people look at problems. Talented and hardworking entrepreneurs behind these enterprises are adamant about changing the world. Innovative technologies and solutions are going to help people cope with hardship in day-to-day life.

Entrepreneurs seeking capital and investment have been lucky to have options like crowd funding available in the contemporary world. Varied important aspects and nuances of capital generation are listed here:

• Crowd funding allows easier scaling: when you are raising endowment via crowd funding you are saving your startup from getting sold out. You can have the requisite money in your satchel and still be the owner of your business.

• Never lose the control: endowment allows you to allocate equities according to you. As an entrepreneur, you can always do the requisite calculation and acquire donation accordingly. This method allows you to manage the business better; with these types of donation you are always going to have a control on your business. When you go with angel investment you tend to lose the control.

• Repaying is easier: Allocate equities according to the contemporary growth of the business.

• People from around the world can invest: With this money generating method you are allowing people from around the world to invest in your business. Crowd funding allows you to get in touch with people who all are interested in your idea. You can always share the platform with the like-minded people and raise the required money for bootstrapping.

• Acquire more than required: Donation can also help entrepreneurs in raising more money than what is required. Smart entrepreneurs are going to use the extra money for infrastructure development.

• Any one can acquire funding: with crowd funding options any entrepreneur can raise seed capital. Running a business just got easier, it is important that you are concentrating on public donation for fund acquisition.

43 percent of startups from around the world have acquired seed fund from the public domain. It allows enterprises to work on their own motives and principals. With resources raised from public entrepreneurs can keep their peace of mind intact and work towards their goal.

Tomorrow is going to be challenging, but an entrepreneur must have a heart of steel. With these options, entrepreneurs are moving in the right direction without worrying about anything. Building your business from scratch is going to be no less than a litmus test. Entrepreneurs will have to be really patient. Innovation is the key for building efficient products.

There was a time when the majority of the people didn’t get financial aid from any banks or money lenders. But currently, a financial trend has changed. You can get financial aid from small finance companies. What is the source of small finance funds? The key sources are credit unions and banks. They provide such loans to individuals and partners. Today even the housewives establish their business through cottage industry. Women are skillful in nature. For example, some women are good in stitching, whereas others can make excellent pickle at home. Some women open their own beauty parlor as their hobby. You must follow some truths while applying for small business money:

Vital facts for small business funding application

Every individual makes mistakes. It is advisable to know the mistakes on time and fix it. You should avoid some factors while smearing for small business funding. Following are few points to consider.

Not paying the increased amount –

Sometimes people have a trend of not paying the sum that has increased. For example, if you have taken a loan and the semi went higher due to increase in tax and vat. People avoid excess amount. This is an unhealthy practice. The lenders will put a negative impression.

No scope for credit advance –

There are some emergency situations at your business establishment. For example, you suddenly need to repair your office room. If you don’t have cash at that time, it will be very difficult. You need to take out the credit in advance.

You have to be very careful while applying for the loan for your small business. You need to care about many things while applying for the loans s that it will not get rejected in any case.

Negligence of own credit –

Firms dealing with funds have become fairly elastic today. But, it is always better to keep yourself flawless. If you have the credit card, make the payment before the due date on a regular basis. This will be a plus point for you when the lenders evaluate your financial statements. But, sometimes you end up will no repayment of credit card bill. You must avoid it. Otherwise, it will provide bad influence on a financial profile.

Business and personal finances mix up –

The lending institutions will be eager to know your business success. Whether you are in loss or gain is what they will find out. Now if you mix both personal and business finances, they won’t get the proper idea. Your case may be rejected. One of the common mistakes, which many individuals make, is mixing up of personal finance and business finance. But this is not the right step to get a good deal for your small business.

My friend during psychiatry residency said, “You should consider pursuing SBIR funding?” I asked him, “What is SBIR?” With this article, I hope to succinctly answer that question and more importantly to explain why Small Business Innovation Research (SBIR) is an excellent way for someone interested in the life sciences to fund an entrepreneurial interest. Once a life scientist establishes a small for-profit business, SBIR funds can support the creation of a technological solution to meet an unmet need in the life sciences.

What is SBIR?

SBIR is a component of all the primary funding initiatives of the US federal government. The SBIR funding solution is not the same as a loan from the Small Business Administration. You do not owe the government anything for its granting of money to you. There is no obligation to pay it back. Still, keep in mind that this is a government-run grant program. You must spend the funds wisely and carefully, follow government standards, and in some cases complete an audit following government standards.

NIH and other branches of government are obligated to dedicate a percentage of their R&D funds to SBIR efforts. SBIR funds are only available to a commercial enterprise, in other words, a for-profit company. This funding mechanism is not designed to complete basic science research or produce a product with no apparent applicability. Funds must yield a viable commercial product sold in the marketplace.

SBIR at NIH

This article focuses exclusively on the NIH’s SBIR program and specifically Phase I of SBIR funding which is the most rudimentary and simplest way to achieve funding. There are similar mechanisms such as STTR as well as more complicated means of obtaining additional SBIR/STTR funds however those are less likely to be the optimal choice and are not the focus of this article.

The NIH SBIR program is particularly well suited to the life scientist-entrepreneur. NIH provides investigator-driven research through its more academic grants as well as SBIR. That means that the NIH program is unique in that it will consider your idea versus telling investigators what ideas they will fund. SBIR programs in other branches of the government will often specify a need and goal of the research. Your project must fit within that specified need. To sum, the NIH SBIR program can be an excellent solution for an entrepreneur interested in creating a product that will add value in the life sciences. But you must assess if the limitations and conditions are acceptable to your goals.

SBIR Limitations and Focus

Phase I focuses only on demonstrating feasibility. You are not expected to complete the entire product, nor fully assess it in all logical ways. Your goal is to use Phase I to demonstrate that the idea is sound, the team is capable and with further funding, it is likely that you will produce something of value. Some ideas cannot be easily demonstrated in a short time frame and with a limited budget. To fit within SBIR Phase I, you must then roll back your plan and goal to a project that is feasible. Reviewers will reject a project that over promises as quickly as one that under delivers.

The budget and time frame for an SBIR Phase I are constrained. SBIR recommends completion of Phase I in six months. With justification, you can request a one-year period for funding. A Phase I SBIR budget is typically limited to $150,000 including any overhead or indirect costs as well as a fee that the government allows, which is maximum of 7% of the other expenses. This amount can be raised to $225,000 if the author can justify the higher amount due to the complexity of the project. If your needs fit within time and dollar SBIR limitations, it can be an excellent source of capital to start your company while retaining full ownership of the enterprise and limiting debt.

More funds are available to support your project. If you obtain Phase I funds and complete the project successfully, you can apply for Phase II, which is two years in length and up to $1 million in funding. Phase II has a greater chance of success if you have had a productive Phase I that demonstrated the feasibility of the project to create a valuable product.

Preparing a Phase I SBIR Application to the NIH

Obtaining SBIR funding is complicated and challenging. As with any funding request, you must have a novel idea with potential and clear value. Alongside that idea, you need a team and an organization with the skills to convert that idea into a product that provides health-related value to a potential customer. You must carefully outline the strategy to create the product and describe the underlying theoretical basis that will guide the development.

It’s helpful to consider an SBIR application as a standard pitch to a business audience, except you are pitching using paper to an academic audience that demands that the process and assertions are backed up with quality references.

The decision-makers regarding funding are not business investors looking for a return on investment over time. In fact, those decision-makers are a collection of individuals ranging from university-based academics to practicing clinicians to small business personnel who likely have submitted SBIR applications and or received awards in the past. Due to the likely academic orientation of reviewers, the emphasis will be more on the scientific basis of concept and rigor of the theoretical underpinnings. It is not just a question, “Is this idea good?” but, “Is this idea based on sound theory?”

All SBIR efforts include research and development to determine the effectiveness of the product. Rigor also applies to the assessment strategy and process as well. The application must provide detail regarding how value will be measured by various metrics and using established methods. For an individual with experience in research, this is relatively straightforward. For an SBIR applicant with no science or research background, the academic component will require guidance from someone with assessment research expertise.

As mentioned earlier, a Phase I application only focuses on demonstrating the feasibility of the concept. In Phase I, you are expected to show that it is feasible to produce the product and that it potentially has value. The typical commercial emphasis on commercial viability is not an essential component of this phase of the application although the potential business value should be relatively clear. In other words, there’s no need for complicated calculations of cash flow, or anticipated pricing, or ongoing production costs. The author of an SBIR application focuses more on the customer need, the basis for that need, as well as a discussion of why the intended product will successfully address that need.

NIH provides complete information online as well as through conferences and other means to assist the individual interested in preparing an SBIR application. Contacts in the government can answer questions about the NIH SBIR program in general or the SBIR program for a particular Institute of the NIH. A local Small Business Technology Center likely has the expertise to assist with a pre-review of the application as well as general guidance. The NIH will not help you write your application or tell you if it’s a good application or not. That feedback will come from the review committee after you apply.

Applications are submitted approximately every four months on the following deadlines January 5, April 5, and September 5. Feedback from the review committee comes roughly three months after you submit and will include the overall committee’s consensus about the application as well as individual observations from three reviewers. These comments are an excellent guide to the problems which may have interfered with obtaining a score worthy of funding by the government. You can respond to the comments and resubmit the application at the next available deadline.

Is SBIR For You?

If you are new to SBIR, consider the first few applications to be a series of attempts to understand the process and opportunities to learn how to sculpt a quality application that fits the structure and limitations of the SBIR program and reviewers’ expectations. That is, achieving success the first few submissions is unlikely. As with most other pursuits, success requires diligence as well as perseverance. If you intend to submit one application for SBIR funding and not to resubmit, then in all likelihood you are wasting your time.

I hope this article can get you started on your investigation of the potential of the SBIR program to fund your life science company. Good luck!