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[F957]Funding Sources For Education

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If you want to create a more normal magazine, while still handling your own distribution, you will need around $5,000 upfront. At this amount, you can use a cheap printing company to produce 2,500 20-page magazines. The rest of the monies would go for content creation, advertising and mailing.

For a larger scale operation, you will need around $100,000+ upfront. This will allow you to print thousands of magazines at one time. In addition, you will have more marketing options, whether it's working with newsstands and/or advertising your magazine on cable television, radio or billboards.

Here are some of the funding sources you may want to consider :

1. Tax Refund/Stimulus Payment
Tax refunds are one of the best ways to fund a business. They usually come in larger amounts and they require no interest payments. The only downside is that you'll have to wait until tax season before you can take advantage of them.

But try to make the best of the time you have. Read up on what type of deductions you can use to optimize your return. And make sure you save your receipts so you can actually take advantage of them.

Also consider lowering your exemptions. In fact, an exemption of zero is optimal, because it will allow you to get a larger amount back. But if your budget can't afford this, see what an exemption of 1 can do for you.

2. Credit Card
Even if you live on a modest salary, if your credit is average, you should have no problems getting a credit card of $1,000. Use this money to start your magazine business, but try not to charge up everything at once. Remember, with a credit card you have to make interest payments, so you need to spend with caution.

Now, if you have bad credit, your credit card options are more limited though they are still there. It's just that you will need to consider getting a subprime credit card. With these types of cards, you'll have to pay a higher interest rate. You may also get a smaller amount of funds upfront. So, it's not an ideal situation, but if you don't have any other money stowed away, it will still be enough to at least get you started.

3. Mortgage Refinancing
If you own a house, you can try for mortgage refinancing. Most homeowners do this at
some point anyway, because it allows them to make payments at a lower interest rate. In the process, homeowners sometimes get thousands back. If this situation applies for you, the money can go for your magazine business.

And, like credit cards, there are subprime mortgages available for people with bad credit. One type almost guarantees acceptance it is known as a hard-money loan. The way it works is simple. The lender finances up to 65% of your property's appraised value. As a result, you get a more affordable payment as well as cash cushion upfront.

However, be careful with hard-money loans, since most tend to be short-term. At the end of the term, you would have to make a balloon payment. This means you would have to pay the full amount of your house. If you don't, your house will be foreclosed on.

4. Personal Budgeting
If you can save $85 a month, in a year you would have $1,020. This is just enough to start a low-end magazine. Of course, you will have to wait until the money accumulates, but in some ways this is a good thing. Why? Well, you can use the extra time to begin developing your content. And, if you don't use any ghostwriters, you won't have to pay anything to create your articles. Plus, assuming you can write just 2 articles a month, by the time your bank account reaches $1,020, you will have 24 articles ready to put in your magazine.

5. Selling Things
If you're willing to part with your flat screen television, leather sofa and other more expensive belongings, you should be able to easily come up with the minimum amount needed to fund your magazine. You might be able to get even more money if you're willing to sell a second or third car you're not using. Indeed, if you get yourself into the right mindset, you'd be surprised at how much money is available through your personal possessions.

6. Friends and Family
If your friends and family are strapped for cash, chances are they're not going to be able to give you $1,000 at least individually. So, what you could try to do instead is attempt to get loans of $50 from 20 family members or friends. Some people may still say no, but others may think about it, since $50 is a lot easier to lend out.

7. Doing Odd Jobs
Do you have a talent for website design or Internet writing? If so, you may be able to collect funds by doing jobs for online marketers. You can advertise your services on free classified ads.

8. Business Cash Advance
This is an option for entrepreneurs who are accepting credit card payments for an existing business, (doesn't matter what industry it is in). And, if these credit card payments total at least $2,500 per month, a lender will probably feel the business is secure enough to offer a cash advance. No monthly payments are required because all monies get paid out through each credit card transaction that is made.

Sound too good to be true? Well, lenders don't mind doing this because they're basing their advance on the strength of a business's stability. Remember, unlike many business loans, business cash advances are given to enterprises that are already making money. That's why they are so much easier to get. In fact, some lenders even brag about their high approval rate for these advances rates that sometimes go over 90%!

9. Grants
Grants, especially those from the government, can be almost as difficult as business loans, but I would say you should still try for them. Why? Well, with a grant, you are getting free money. You are not obligated to pay a grant back, even if your magazine business fails. But with a business loan, you are still responsible for the payment, whether you return a profit or not. The only exception is if you file bankruptcy, which leaves a horrendous mark on your credit report.

10. Pre-Advertising
Finally, there's the option of trying to acquire funds through pre-advertising.What is pre-advertising? It involves offering a business the promise of ad space in your magazine. When the magazine is printed, you will fulfill your promise by actually including whatever ad the person ordered.

How do you find that money? If you have saved up some, you can use that, or you can go to friends and family and get some money from them, if they support your concept and think you can do it. (F/F/P phase)

There are two other sources to go to as well, Angels or Venture Capitalist.

An Angel is a person or group that typically gives a startup up idea from $25K to as much as $1M (that much is typically an Angel Group) to begin developing the Proof of Concept or the product itself. You should go to an Angel Funding Source if you need less than $1M, and typically less than $500K, to get your product built, or if your plan requires a Proof of Concept, the Proof of Concept built.

If you go to an Angel or Angel Group you need to look at some factors before starting to talk to them. Do some research and find out:

1. What the person/group you are interested in asking money from typically invests their money in.
2. If they accept Venture Capital as a future source of funding.
3. If they are willing to add more cash down the line to help reach that "next" milestone.
4. If they have contacts with people that may be interested in providing more money should the need arise.
5. If they have contacts that may want to use your product/services.
6. How much control/hands on activity they want to have with your company. (Do they want to sit on your Board of Directors or Board of Advisors, do they have any say on how the money is spent within the company?)
7. And if you are going for a lot more money in the near future, if they work with or know any Venture Capitalist that like your industry/product type.

It is the recommendation of TDBell Enterprises, Inc., that you work with your Angel Investors as an Equity Play, meaning they get a small portion of your company for the money they invest. We do not recommend that you use the money as a loan.

A Venture Capitalist is typically a person or company that has gone to from one to many people, companies, retirement funds or other large pools of money and created a Venture Fund that is geared to one or more industries/products/services. These funds typically finance a company from $500K to over $200M, taking stock in the company as "collateral".

Like going to the Angel Investors, you need to look at a few things when you go to a Venture Capitalist:

1. Has the person/group invested in companies in your industry?
2. At what stage of the company (Proof of Concept, Development, Revenue in place (and if so, at level of revenue is required), etc.)
3. Are they going to be Sole Investors at this stage, or are they going to have other groups joining in this round with them.
4. How involved are they going to get with your company? (Do they want to manage the company, etc?)
5. Do their portfolio companies need your product and will they introduce you to them if they do?
6. How much of the company stock do they want?
7. Will they add more funds to the company should it be needed? (And if so, at what cost to you?)
8. How much reporting do you have to do to them?

After you have looked at the available Angels that you can find, the available Venture Capitalist you can find, you need to decide which path is the best way to go for your company and your "style".

If you are confident that you will need Venture Capital level funding, after you narrow your search down to the Venture Capitalist you are going to target, and have answered the above 8 (and a few more I'm sure) questions, you need to decide if you need to go to an Angel first.

At this point you start fine tuning your financial section to meet the needs of the Investor you are going to approach. The over all business plan stays the same through this process (unless you are fine tuning it to meet development/production needs due to feedback, etc.). The only part of the business plan that changes is the Financial Section(s) and that changes based on the target Investors. You already have in your plan the steps to go live and to go to revenue. You have your milestones written down, etc, in the plan, and you have "line items" in the financial section that correspond.

Example:

You are going to create a software/hardware intensive service product that requires FCC approval of the Concept. To create the Proof of Concept to meet the FCC needs, you need $750,000, but to go to revenue you will need roughly $35M (which includes the $750K). You are able to get a Friends/Family/Personal Pockets (F/F/P) round up of $150K.

Your research shows that the available list of Venture Capitalist out there that would fund this project require you to have your FCC permits in place, a working model of your service product in place, and 1 solid customer ready to pay for your services once you are able to build out.

In this example you would need to go to one or more Angel Investors to help you reach the remaining $600K to get your prototype up and running to do the testing that will satisfy the FCC. You would want to find an Angel or Angel Group that allows for future rounds of Venture Capitalist backed funding. This group would hopefully be willing to add a bit more in if needed to go past any "gotcha's" that may crop up as you answer the FCC requirements.

Now that you know you are going to an Angel or Angels you rewrite your financial section to show an investment of $150K (F/F/P), the need and the use of the $600K from the Angels, and when the remain investment of $34,250,000 will be requested and how it will be used.

When you write up your presentation to the Angel(s) you show the Living business plan, current Financials, and talk to your needs.

When you get to the Venture Capitalist later you write up your presentation, you show the current business plan, which no longer has the Proof of Concept stage in it (it's completed successfully, and not part of your plans now, living business plan remember?) but shows next stages over the next three to five years as perceived today, with the financials now showing how you spent the last $750K, and what you will be doing with the next $34,250,000 that you are asking from the Venture Capitalist.

Following this plan of action in targeting your funding request will save you time, effort and lead to stronger successes!

Don is a Venture Capitalist with over 15 years of successfully funding early stage Ventures. Information on his fund can be found at His company also consults start up companies on business plan development and start up strategies,

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