Creative financing: A ‘hot’ market makes alternatives easy to overlook

Do you really need to give away the store in an IPO?


Companies looking to raise capital these days can hardly be blamed for looking first at the IPO market, given the inherent panache and skyrocketing Dow. But owners intrigued by the notion of an equity offering need to remember that any kind of equity involves giving away at least part of the store. Even debt financing, while preserving control, comes at a "rental price" some may not want to pay.

Get the cash, keep the control

There are creative alternatives for those with time and energy to explore out-of-the-mainstream sources, says consultant Bruce Barren of EMCO Financial Group. Some examples:

Licensing agreements. Off-balance sheet assets like patents, copyrights or trademarks can be sold for lump sums. Most major accounting firms have practices aimed at helping firms identify, value and leverage such assets under the broad category of "knowledge management."

Vendor financing. Now that partnering and supply chain management have taken hold, getting financing from business partners as part of a sale can make sense.

Research and development grants. These are available from a wide variety of sources, including government, research outfits, foundations and large corporations.

Private foundations. Included in this category are private trusts established by individuals. One example is the Ford Foundation. Note: You’ll need a well-crafted funding proposal.

CFO & Controller Alert
June 8, 1999