Bill Gibson – How To Raise Money Without Your Bank – Even In These Times

(With Ryan Gibson and Wessel Ebersohn)

Growing businesses need money continually. The owner of a growing business is forever running into costs, both planned for and unforeseen. The business owner may need cash to survive in tough times when something unforeseen strikes. When times are good the business owner will always need cash to build and grow the business.

Right now, going to your bank is not necessarily the best option. They were careful before the current economic downturn hit. They are even more careful now. Remember that they too are working with the money of investors. Like you, the bank cannot afford to be reckless.

This is not to say that there is no money available for entrepreneurs. There is less of it, but it is there. You have to find a way to get your share of it.


A good place to start is with your current investors, if you have any. If you do have investors you need to look after them in every possible way. Nurture a relationship based on openness. Be aware of their need for information. Share with them the challenges the business faces. Seek their advice on difficult issues. Above all, never cut them out. If you invested in someone else’s business, you would want to know exactly what was going on in the business. Treat them the same way.

Family and friends

If you have no current investors, the next best bet is your family and friends. Today loans from family and friends are an immense industry. Virgin Loans, operating in North America, does nothing but facilitate such loans. They supply the documentation and give the entire transaction a solid legal basis. According to their figures, some US$170 million was lent to entrepreneurs worldwide by family and friends in the last quarter of 2008. The fact that Virgin Loans has been successful is an indication that family members are more comfortable with lending a substantial sum if the loan is properly formalised. The lender will need that extra security. When approaching a family member make it clear that a formal contract will be drawn up by an attorney. If you are lucky enough to come from a business family, you may not only get the capital you need, but you may also receive good advice that in the long run may be more valuable than money.

But remember that even your closest family and dearest friends have to look after their interests. You may need to enter a deal in which the business repays the loan eventually and the investor still retains a minority shareholding in the business. The main effect this will have on your business is that when the day comes to sell it, your investor will receive his or her share of the proceeds. A major advantage of borrowing from those close to you is that usually no collateral is required.

Every prospective investor has to be treated with respect. And that includes family and friends. The same way that you need to do your homework for any other investor, so you must prepare your approach to family and friends too. You cannot expect people to hand over money blindly just because they know you well.

Honesty is the best policy

Above all, no matter who you are dealing with, always tell the absolute, unvarnished truth. If you are in mining, the investor needs to know if you are actually digging up the metal or if you are still just at the exploration stage. The same applies to any business. Tell your prospective investor if you are still developing the product or if it is actually on the market.

Better still, show them exactly where you are. Misleading them in the smallest detail is bound to have serious repercussions later. It is vital to keep investors and prospective investors as close to the action as you can. Treat them like board members, show them where the money is going, make it clear that their money is being used carefully. Then be sure that you use it very, very carefully. Under such circumstances investors, of any kind, feel more comfortable.

Don’t play games

Also make quite clear from the beginning what you are prepared to give up. In a recent case the writers of the article were involved with a young entrepreneur who needed an equity investment of R600 000, but he was so unclear about, or unwilling to discuss, the actual percentage of his business he was prepared to give up in exchange for the investment they lost interest in getting involved raising the money.

It is good to be cautious about how much information you give although it can backfire, especially with friends and associates, if you are too cautious with your information. They may be insulted that you don’t trust them and decide not to get involved.

Where to find investors

Many successful business people have started with a number of small investors. Raymond Ackerman started Pick ’n Pay with the help of 100 small investors, each coming in with a mixture of equity and loan finance. This divided the risk among the investors, making it easier for them to make the investment. Most investors like to have a small speculative investment that may show a really big return. A sound place to look for investors is in your own industry. People who work in your industry understand the business and know what you are trying to achieve. They believe in the industry and are therefore more likely to believe in you. If you can get a key investor, someone with a big reputation in your industry, even if he or she only comes in with one percent of the investment you need, others are likely to follow. A real leader will open doors for you.

Exhibit confidence

One absolute when dealing with any investor is not to come across as if you are fearful. No one is going to invest in someone who is afraid of the opposition. More than anything else, investors need to see that the business they are investing in is led by someone who has confidence. And there is a difference between confidence and bravado. Big talk is not going to impress anyone. With confidence comes courage. You have to be ready to accept refusals. You are certainly going to have those. If necessary, you must be ready to approach industry heavyweights and pitch your investment to them. One entrepreneur recently successfully sought investment from the boss of a major multinational. He had tried phoning him, but a solid wall of receptionists and PA’s kept him out. He could not even discover his target’s email address. So eventually he tried an email, using the man’s name @ the company’s name. He made contact that way and, after a few meetings, secured the investment. Business is not for the faint-hearted.

The most common ways for entrepreneurs to finance their companies in the early days are probably securing second, third, fourth of whatever bonds on their homes. Cashing in insurance policies is another. People do what they have to do to grow their businesses. There are many other ways of getting what you need without having to pay for it. This can be just as valuable as receiving the hard cash. Here are a few:


If the service or product you need is supplied by someone who uses what you have to offer, getting them to agree to bartering should not be difficult. Fundamentally, any agreement to barter must be in the interest of both parties. If not, it simply doesn’t work. This publication was once offered a barter deal by a sweet manufacturer. We could not imagine how we were going to consume that amount of sweets, so the deal fell through.

Negotiate no rent for the first six months

This will only work in an area in which office space is standing empty. In all such deals you need to look at things from the other party’s point of view. If their offices have been empty for a while, they may well be agreeable, but you will have to sign a long lease.

Offer discounts for upfront or COD payments

Getting money in fast is almost as good as capital. The discounts will have to be genuine, but businesses that are cash-flush may like the idea.

Seek investment in a product or project

Instead of giving away equity in your company you could seek an investor for a single product or project. This would have to be clearly defined and the investment would probably be smaller, but it could get a key part of your business off the ground. This option could be interesting to a company operating in broadly the same field as you are. In time you could either buy them out or sell them the entire product.

Pay a premium for extended credit

This may work if a major supplier to you can afford to carry you for a while. The downside will be that you will have to pay heavy interest. You will also have to persuade the supplier that you will be worth the risk in the long term.

Have someone stand surety for you with a major supplier

This publication was started that way, when Martin Dannheiser, the owner of the Springs Advertiser at the time, stood surety for our printing during our first year of operation. Your reputation is everything here. The person who stands surety must have great confidence in you. He or she also needs to be a real friend.

Trade equity for expertise, services or products

This sort of investor will only come from the companies that supply businesses like your own. A relationship with the supplier will be needed before they feel comfortable with this arrangement. How much they will have to supply before receiving the equity will be the main issue.

Return on investment of your personal assets

When searching for finance, remember that you do have assets that belong to you. First look at exploiting your own personal assets. You could minimise your needs simply by making best use of your skills. As a business owner who needs to prospect for new clients and mine your client base for opportunities, you need to consider the kind of return on investment you receive from investing your personal assets. This is, after all, what you possess. The better use you make of your personal assets, the more likely you are to be successful.

Your time: It is important that you invest your time with the right people and that you do the right things to get the best return on your time. It is your most valuable asset.

Your energy: If you have the time available, you must also have the energy. Some people give you energy and others drain it. Stay close to those who give you energy and avoid the others. Get them out of your life. Certain habits and activities invigorate you and give you energy. Other habits and activities take away your energy. It is important to value and invest this asset called energy wisely. When your energy is up, you will notice that your passion and motivation are up as well. Energy is a key ingredient to your success as an entrepreneur. Stay healthy and remember this quote. “If you don’t take care of your body then where are you going to live?” Your body is the only piece of real estate that you have from the time you are born to the time you exit this planet. Take care of it! 

Your ability: Your expertise, ideas, knowledge, skills, and general “know how” are all valuable. You can waste these vital assets on some people, but working with others may give you great returns on your investment. Ability is an asset to develop continually and always use wisely.

Your money: In the beginning the business owner is usually short of money. You always need to invest what you have wisely. In the early days of your business this need is more intense. Consider carefully for whom you buy coffee or lunch. Some people over lunch will give a great return on investment in referrals, business and even personal motivation and support. Others may add no value whatsoever. An investment in new clothes, joining the right association, attending the right conference, eating at the right restaurant and buying personal development tapes may be a better investment than a night on the town with old friends. To build your business, you must invest these assets wisely.

Your reputation: Successful, experienced businesspeople get most of their new business from present clients and their network of business and personal associates. This is possible if you network and associate with people who enhance your credibility. Positive word of mouth is powerful and in time it becomes your biggest asset. Select carefully the places you frequent and those people you socialise and do business with. Your name is your future. You are a brand. Invest in it wisely…

The 6 Personal C’s that interest an investor or creditor

With input from Sibongiseni Ngundze, the Managing Director of Nedbank Small Business Services, the writers came up with the following six Cs that investors, lenders and creditors carefully look at before getting involved. 


You must have a good concept, something that sets you apart from the herd. If you are in retail, it may be something as simple as being close to easy parking or being located in the centre of the clientèle you serve. In other industries it may be something more complex, but simple improvements often make a decisive difference. An extra element of service or a practical improvement of a product may make you top of the class.


This goes way beyond personality. Character is the combination of qualities you possess that makes people trust you. Honesty, perseverance, dependability, reliability, supportive qualities, loyalty, enthusiasm: these are the sort of character aspects that make people interested in doing business with you.


Do not attempt something for which you do not have the capacity. If you are trying to go beyond your abilities or the capacity of your business, investors are likely to see this and be frightened off. On the other hand, should an investor not understand that you have gone beyond your capacity and invests in your business anyway, the results could be disastrous.


When banks talk about collateral, they usually mean fixed assets like property. Completely different collateral arrangements can sometimes be arranged with a private investor. For instance, the investor may be willing to take a percentage of your business as collateral. Or they may be satisfied with your character, concept and commitment and ignore collateral. 


A bank or an investor wants to see what your contribution to the venture is. This could be the amount of money you have or will invest. It may be in the form of intellectual capital, equipment, property or just good old hard work and expertise. Be prepared to show your level of contribution.


Nothing is more important than commitment. Seeing that you are truly committed gives any investor great confidence in the undertaking. You need to be able to demonstrate to the investor that, for you, the business in which the investment is being made is a life and death matter.

The 5 Stages of building a relationship with an investor

If you want someone to invest in your business, you need to build a relationship with that person. Here are the five stages of building a relationship:

1. Attraction

Demonstrate your uniqueness. If you and your business are the same as all others, why should they be interested in you or even consider investing in you. Respect boundaries. You may be outgoing and extroverted, but you may be dealing with someone who is not. Do a lot of listening. You need to understand the other person’s needs and wants. Make contact frequently. You need to work on the relationship. Lunch and dinner meetings, family dates: such contact builds a relationship.

2. Exploration

At this stage you need to give outstanding service. Go the extra mile. The rule is to under-promise and over-deliver. You must keep every commitment, even the smallest ones. Consciously or unconsciously, the other person is testing you. Being innovative and resourceful will help to show that you are different. Do not let up on making frequent contact. It will help you move to the next stage.

3. Development

By this time you need to be proving your abilities and, above all, you must be seen to be keeping your promises. Your relationship with the investor should be moving to a personal level. You should by now be networking with those who surround the investor. Keep up the frequent contact, but do not be a nuisance.

4. Commitment

By now you should understand the investor’s decision-making process. Try to anticipate the investors’ needs before they know. By now you must also understand the politics surrounding the investor. Both sides should now be committed to the relationship. Continue the frequent meanings to strengthen the relationship.

5. Unity

At this point you should be leading the process to get the job done. You are now seen as a close associate of the investor. You are involved now, a member of the inner circle, so tread lightly. The investor is on your team now.

“If you have found this blog article to be valuable for you, I would be grateful if you “shared” it with your Social Media Networks. Also feel free to circulate it by e-mail or other means internally within your organization or externally to your clients, suppliers and personal and business network. Thank-you!”    – Bill Gibson

Bill Gibson is a Canadian who is living in South Africa. He is an international speaker and author and a developer of sales, service, marketing, collecting, employee morale building, personal development and entrepreneurial training programs and systems. His blog is and his website is He can be reached at or phone +27-11-784-1720 in South Africa. You can follow Bill Gibson on Twitter: @billgibson1, connect on LinkedIn: or Knowledge Brokers International SA Pty Ltd Facebook Page:

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