Raising funds is a way to uncover new cash sources for your business. A process that brings together an idea and the finances needed to make it happen. You must be willing to expose your ideas in return for others to be as excited and willing to promise their funds to your venture. As payment for the cash injection, these funding sources will be given a stake in your business or partial ownership of some or all of one of the property titles, giving them a vested interest in you, your business and the property development project.
There are different stages and reasons for raising cash.
Getting an idea off the ground.
Taking advantage of a slump in the market where future growth is predicted.
An opportunity to scale and expand to become a bigger player within your industry.
Whatever stage you’re at, a financial injection may be just what you need to take that next step but isn’t without careful consideration and compromise. After all, this is a financial transaction and a return is expected.
Use your proposal to showcase your offering and explain the opportunity for the funding source, whether private or commercial. What do they get out of it? Clearly define the risks and the work you’ve done to minimise and overcome them. Show them the opportunity. How will this benefit them and provide an asset for the future or a suitable return?
In Australia, there are 2 main ways to raise funds, which, while common for general business, can also be applied to Project Developments:
- Disclosure and
- Non-Disclosure.
Each option is regulated by the Corporations Act. Whichever option you choose, there are penalties for not adhering to regulations.
Non-Disclosure
With less costs associated with regulations and compliance, this is a cheaper option but can only be offered to “Sophisticated Investors” as defined by ASIC and it must be a personal offer.
A small scale offer is limited to raising $2 million and is mandated by the ‘20/12’ rule; meaning a maximum of 20 retail funds sources (generally private funds) in a 12-month period.
These offers are made to creditors under a deed of company arrangement, however there are certain conditions that must also be met. Refer to the ASIC website for full details.
Disclosure
ASIC requires a business seeking funding via Disclosure to lodge a prospectus or Offer Information Statement for approval. This is most common if you are planning to list on the stock exchange. There is no limit to the amount of funding raised, but is dependent on the approval of shareholders. Working with someone who holds a Financial Services Licence is necessary to undertake funding of this nature making it a much more expensive approach.
Angel Funds
Angel funding sources are individuals who make cash injection for profit, their business. They are open to supporting small companies with a bright future, including property developments, often wading through pitches and proposals to find the right fit for their dollars. There is an international network awash with enthusiastic entrepreneurs, marketing their ideas and reasons for why their project should be chosen. Your job is to make your property development project shine above the rest.
https://www.australianinvestmentnetwork.com/
https://www.australianinvestmentnetwork.com/business-proposal/industry-real-estate-16
When searching for potential funding, you should already have decided the best process that will work for your situation:
- a solid business plan;
- foresight for your current project and;
- the direction you want to take your property development business.
It is essential to have completely researched and provided the anticipated returns which can be expected by your potential partners. Equally important is that a full feasibility study has been undertaken to ensure that the project you are presenting is sound and has accounted for all conceivable circumstances.
These are the keys to gaining not only additional finances but a certified interest in your offering. You should be considering how your offer stands out in relation to the hundreds of others already passing through the office of private and commercial finance sources. Seek funding sources that have a particular interest in property if possible. This will give you the chance to build a personal connection, paving the way for a business relationship.
Talking business is one thing. You might be filled with passion and excitement, but this alone will not win you that all important cash injection. Documentation and a thorough understanding of the property development market and industry are crucial in building trust. Be clear on your message. Your reason for seeking funds and how you plan to use them will ensure your offer is considered more favourably.
FURTHER READING –
http://asic.gov.au/regulatory-resources/fundraising/raising-funds-in-australia/
http://www.asic.gov.au/media/4511533/rg203-published-12-october-2017.pdf
http://www.buzinga.com.au/buzz/venture-capital-australia/
DISCLAIMER – Alleura recommends each individual seek the services of a qualified service provider before undertaking any financial investment. The information provided here is for general information purposes only. It is not intended as financial or investment advice.
