| Then, there are those businesses that lose | | | | sell part of your business, your equity, by selling |
| money year after year, and it can be a mystery | | | | shares. As your business becomes more |
| how they continue to amass investment capital | | | | established, it will be easier to get bank loans. |
| and continue to grow. These are intangible values | | | | Often companies selling goods sell part of their |
| called "goodwill" that actually, in an adequate | | | | accounts receivable at a discounted rate of |
| accounting statement, is put on the books. If the | | | | 10-20-percent or more. This is called factoring (of |
| "Youtube" website is purchase for $1.5 billion | | | | your accounts receivable), and has the advantage |
| dollars, it has to be explained to the stockholders | | | | of accelerating a companies cash flow cycle. That |
| of the purchasing company, why this money has | | | | is the time cycle it takes for money invested in |
| disappeared from their assets, to buy a company | | | | producing new inventory to be sold, and for cash |
| that has never earned one dollar in the positive | | | | to be collected and deposited. Another source of |
| column. This value is chalked up to "goodwill" that | | | | loans is the U.S. Small Business Administration. It is |
| the purchasing company has acquired. They have | | | | worthwhile to check with the local Chamber of |
| acquired a brand name and a distribution network | | | | Commerce if there are other local or state |
| that will be (hopefully) profitable enough to | | | | government sponsored loans available to you. For |
| warrant the initial large investment that was | | | | example, many states and local governments |
| spent. | | | | have been making loans and even grants to |
| How is it possible for businesses to lose money | | | | promote energy efficiency and conservation is |
| year after year? This is a process facilitated by | | | | small businesses in the recent period. |
| raising capital. Some small businesses in the start | | | | Equity financing can include attracting capital from |
| of phase have great difficulty raising money on | | | | investors of various sorts. Of course, you can |
| the capital markets or from investors. The owner | | | | also lose control of some or all aspects of the |
| is obliged to borrow money from his home equity, | | | | business if you shell shares, but this can be a rapid |
| his credit cards, and any other personal assets he | | | | way to raise capital. This is how firms that seem |
| or she has. | | | | to lose money for years continue, because they |
| In general, there are two ways of raising capital. | | | | are seen as developing an attractive brand or |
| You can get a loan, and go into debt, or you can | | | | product. |