The High-touch Legal Services® Blog…for Startups!

© 2009-2020 Dana H. Shultz, Attorney at Law

WSJ: More Funds for Startups, but Still Hard to Get

In an article yesterday, the Wall Street Journal reported that funding for startups is more plentiful than it was a year ago, but still is hard to come by (Start-Ups Chase Cash as Funds Trickle Back).

Among the phenomena discussed:

  • Angel investment groups that want to see profitability before they invest
  • Reduced availability of funds from home-equity and retirement-account loans because of lower? asset values
  • Dedication of additional money to protect existing investments rather than to start new investments
  • Availability of venture capital only if a company has a product or customers

Related post: Realistic Financing Options for Startup Companies

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Asset-Based Lending on the Rise according to WSJ

Logo for WSJ.com, which published an article about asset-based lendingIn an article yesterday (Asset-Based Lending Grows in Popularity), the Wall Street Journal reported that asset-based lending – loans secured by the borrower’s assets as collateral – surged during 2008 and 2009.

The reason: Businesses that lack the credit rating, track record, or patience to seek traditional sources of capital can get loans by pledging their equipment, inventory, accounts receivable, or other liquid assets as collateral.

Downsides: Asset-based lending comes with a relatively high interest rate. If a payment is missed, the collateral may be seized by the lender.

Related post: Realistic Financing Options for Startup Companies

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.

Need Funding? WSJ Offers Tips to Gain Credibility

In a November 30 article (“Trust Me”), the Wall Street Journal offers tips to entrepreneurs who want to gain credibility in the eyes of potential funding sources.

Based on a study of key individuals at 28 entrepreneurial ventures, the article asserts that “the most successful founders were masters at making symbolic gestures that signaled stability and credibility” in four vital areas:

  1. Personal CredibilityExample: Revealing personal details that strike a chord with listeners
  2. The Company’s ProfessionalismExample: Thoughtfully prepared web page and business cards
  3. The Track RecordExample: Showing a prototype or a controlled product demonstration
  4. Emphasizing and Building Ties Example: Being associated with prestigious stakeholders

Takeaway: In a tough, competitive economic environment – especially if you are an entrepreneur without a track record – sending a message of credibility is just as important as having a great? product, a large market, and the right management team.

Disclaimer: This post does not constitute legal advice and does not establish an attorney-client relationship.

The “Independent Contractor” Trap Becomes More Dangerous

Earlier this year, I wrote Avoiding the “Independent Contractor” Trap about the dangers that companies face if they misclassify employees as independent contractors. The Wall Street Journal recently reported (Employers and Workers Clash in Court Over ‘Contractor’ Label) that those dangers have increased.

According to the WSJ article, the Internal Revenue Service will audit 6,000 randomly-selected U.S. companies in its first attempt since 1984 to quantify the extent of employee misclassification. The IRS is not taking this step merely to help the individuals involved receive the pay and benefits to which they are entitled – state and federal governments stand to gain billions of dollars every year from withholding taxes, unemployment insurance and workers’ compensation if workers are classified properly.

Even greater than the risk of a government audit is the risk that a disgruntled “independent contractor” will file a wage claim (see Wage Claims – Nasty but [Sometimes] Necessary).

Avoiding the “Independent Contractor” Trap lists factors that can help you determine how to classify workers properly.

This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact an attorney directly.