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Garage Capital

INTRODUCTION

Many famous businesses were started in the garage of the owner, or in a rented garage. When people sell things they do not want on the lawn in front of their house, this is called a "garage sale." This is where we get the name "Garage Capital." This book is about how money is borrowed, or how business partnerships are created. Any business can use this information. If you have a business like a computer software company, this book might be very helpful. Computer businesses can be very profitable. This book was written by a Christian who believes that as we love our neighbor, we will reap "an hundredfold." All glory to God.

The information on this site was not gathered by a lawyer or powerful financier. When this site was started, there were very few web sites where information about how money is raised could be found. So, a former stockbroker with very little experience created this guidebook. The author cannot be responsible for errors in this site. Stick with the Golden Rule, and try to confirm this info on other websites, if you can; and hire a lawyer to help you, if you can.

This book was written for the regulations of the United States, and especially the state of California. Because of the stock market problems in 1929, regulations were created to prevent dishonesty and fraud.

Most of the regulations do not affect small companies, but this book includes information about complicated business partnerships like stock corporations. If you sell someone a small part or share of your company, then you do not pay the money back unless the company is successful or is dismantled. As a Christian, I do not sell stock if I think the company is weak or risky.

How does a new business succeed? It has products or services that express Christly love and help people. God is giving us these charitable ideas every day.

Charitable businesses that provide safer homes, or less expensive electricity or water, can get money more easily sometimes.

This book is not about becoming rich. It is about doing good things because you enjoy doing good things, and then seeing what happens. If you want to live in a material universe, find out where the cheapest land is near a growing city and buy some cheap land. Commit to a high paying job that will not compromise your physical or mental health. Find ways to reduce living expenses. There are many books about millionaires, and how they made their money. A loving parent who provides inexpensive rent can be similar to winning the lottery. If you earn and keep most of $35,000 per year, you will be able to buy a nice house or even a duplex with cash flow after four years. I do not believe this is as powerful as a spiritual understanding, because I have noticed how that there are many signs that we do not live in a material universe. We live in a spiritual universe.

So, why a book about how to get money to start or grow a business? When we start work at a job with a lot of potential for promotion and salary increases, we start near the bottom usually. It seems to be that way spiritually too. We have to start somewhere. Business is probably pretty close to the bottom of the spiritual ladder, with careers like being a spiritual healer and teacher further along.

THE THREE PAGE BUSINESS PLAN

If you get a good idea for a business, write it down in a very short form. No more than three pages. Show it to people who you respect. A short business plan like this is sometimes called an "executive summary."

Use the Golden Rule. If you were an investor, what would you want? You would want for the company to approach you when you had nothing to lose, when you were rich. When we have very little, we sometimes are more fearful of investing. You would want the investment to have some sort of tax advantage or guarantee that would protect you -- a "win-win." You would want it to cost very little -- using the weeds from your lawn, or a used car you were going to sell cheap -- and to pay you back 200% or more.

If the people you show the three page plan like it very much, you can move to the next step.

If the people you show your plan to do not much like it, you can try to improve the plan by making samples or talking to experts about details. Sometimes a sample or expert can help a great deal. The plan has to be very honest and not guarantee anything.

Here is a Three Page Sample executive summary. The facts are not correct; it is here primarily for an example. There are other, even better, three page business plans on this site. For instance, here .

If the people you show your plan to very much like it, they may help you to polish it by adding pictures or in other ways.

NON-PROFIT CORPORATIONS and GRANTS

Some ideas are so loving and important, like removing the salt from ocean water to irrigate the land, that special government and private foundation money is available. This money does not have to be paid back. It either creates so much prosperity or reduces so much suffering that it can be tax deductible. There are many good projects that can get money this way. These projects are also good because they are the kind of work that the Lord helps us do without becoming tired or discouraged, or getting sick. It might be a good idea to start a charity. In California, it costs $30 to start a charity.

GETTING A LOAN

If your business plan is strong enough, you may want to get a loan.

As long as we keep our credit reports unblemished, we should expect to be able to borrow. It is important to demonstrate this self control and awareness of capacity to recover from minor losses if they occur. If we love our fellow man, the need should not occur, because loving intentions are allowed to follow through.

If you wanted to ask someone for a loan, what would you want? Would you want to know if they ever did not pay back a loan? Would you want to know if they owed people money? These are things that one must tell a lender.

Many kinds of businesses can benefit from loans, such as banks. There are many kinds of loans. The most difficult loans are "student loans" and "SBA loans" because they cannot be wiped out by bankruptcy. Many companies like to sell "SBA loans" because they can make more money if the loan defaults (fails) than if it is paid back.

If you are creating a business plan, like the three page business "summaries" above, then you will probably not be offered a loan. The investor who wants to help you will probably ask you to become his partner, and for you to take a small salary and percentage ownership of the company. One advantage of stock companies is that the money does not have to be paid back.

Some businesses are perfect for loans. Christmas tree lots and other holiday retailers can be rented and stocked using a credit card-type loan. Office buildings can be purchased or built during times of expansion, with the loan fully collateralized by the value of the building, which quickly increases in value.

CONTACTING INVESTORS

There are two rules about contacting investors: be very honest, and do not advertize. The law allows business people to approach rich people with great ideas. The law discourages business people who want poor people to give them money.

You can call or write rich people like millionaires, as well as accountants, financial planners, lawyers, stockbrokers, retired bankers, people in a similar business, good friends, and professional investors like "venture capitalists." You cannot call a person who has a good job and savings but probably has less than $200,000 available to invest. If you call a person like that, you must be careful what you say. The law allows you to become that person's friend before you tell them about your investment, but not to directly sell them stock first. What some people do is give those people stock for free; this is more honest and complies with the law. Another thing that people sometimes do is ask for people with many rich friends to help them. The people with rich friends have what is known as a "pre-existing relationship" which makes investing in a business a "private" transaction.

There are something like 3,000,000 millionaires in the United States.

One way to contact investors is to ask a friend to help you. In some states, you can pay them a percentage of the money you raise right away, but in states like California, you may not. In California, a "finder's fee" can be handled in several ways. One way is for the friend to have $10,000 posted vouchsafing their work as insurance. The government holds onto this money for two years. The other way is to tell your friend to trust you, and wait until when the investment becomes profitable. They will be paid a fee of from 4% to 20% when the investors have made much more than 30%. In both cases, being a "finder" is a job for someone who has a steady job or is retired and can afford to wait. The best that the rich men's friend can obtain at the time of the purchase -- without the $10,000 insurance deposit to California -- is a loan or a gift. The rich men's friend may combine the purchase of the investment in your company with a loan for him, payable when the company has made more than 30% profit. This seems like more trouble than it would be worth, but if the salesman complies with the law and says how good his credit rating is and what he owes people -- he can receive a borrowed commission. He must pay the money back though, whether or not the company is successful, or he will have to pay it back in small claims court.

It pays to make friends with someone who would like to earn a "finder's fee." "Finder's fees" are also called "referrals." A person who wants to become a "finder" should talk to someone who is doing it. It helps to ask around. Helping people gather money for their businesses can be a good business. A single $1,000,000 project like a loan for inventory may pay a 5% commission, or $50,000. There are some risks: sometimes, the success of an investment salesman will cause a bank to reconsider lending to a company at a good rate. The investment salesman sacrifices his work for the friendship of both parties, and hopefully some referrals, and trusts the Lord.

If your business will be expensing "finder's fee" percentages as cost-of-money, it will have to disclose that in a written form before the investors give you money. That means, creating a disclosure document, which is also called a "prospectus." If your good friend is getting 10% of your investment, he should tell you.

It is much quicker to make friends with the help of a friend, than by calling strangers.

FORMAL AND CASUAL AGREEMENTS

Many agreements are casual. One very common casual agreement is to make a loan to a friend, and if the business succeeds, to pay back the loan quickly. If the business becomes a great success, then the grateful borrower may want to give the lender a gift each year for several years. In the United states, a person can give another person up to $10,000 per year without the recipient being taxed. Or if the person is very very successful, and grateful, they may make the person a partner or shareholder instead of paying back the loan.

In a casual loan agreement, there will usually be a contract, and it will describe whether the borrower has any outstanding debts or past credit problems, and when the loan is expected to be repaid. If the casual agreement is between good friends, it may not have a repayment date. A loan is a serious obligation, but a casual agreement is usually between two people who are mature and honorable, and who have no intention of going to court.

As capital arrangements become more formal, legal counsel becomes necessary.

One way to avoid formal arrangements is to keep things simple. Keep organizations simple. Keep arrangements and timing simple. Do not form partnerships. In the case of a group of actors making a movie; instead of forming a corporation and having every actor a part-owner, make one actor the owner of the company, who owes royalties to the other actors.

THE FANCY STUFF

At some point, it will be good to have a friend help translate the other pages of the "Garage Capital" web site.