Financial Brokers
You will undoubtedly cross paths with financial headhunters or brokers during your quest for financing. These individuals or companies usually work for a commission and typically want a portion of your company's equity as part of their fee. You should exercise caution when employing a financial broker, since they are generally not licensed like stock brokers, attorneys, and accountants, and there is little public information available on them.
Always insist on references and do a thorough job of due diligence on the brokers. Avoid paying up-front fees if possible. If travel expenses are required, approve them on a case-by-case basis. Avoid signing an exclusive agreement with the broker, but if you must, have the period of exclusivity expire after thirty to sixty days if no meaningful results are forthcoming. In all events, make certain that the broker is not paid their fee unless financing actually occurs. Make sure you have the absolute right to decline any financing offered for any reason.
Many brokers will try to convince you that your business plan needs upgrading to an investor-grade business plan before they can present it, and that will cost you several thousand dollars for the makeover. If you have a solid business plan with CPA-blessed financials, politely decline the offer.
