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Your Business Financing Paper Trail

Proper fundraising requires carefully prepared documentation at every step. Here's what investors expect--and what the law requires.

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This story appears in the March 2007 issue of Entrepreneur. Subscribe »

Even in today's fast-paced business world, raising money relies more on paper and ink than point-and-click. Whether you are looking for funds from a bank, a VC or just a rich uncle, it is crucial to communicate your ideas and plans on paper. And what a pile of paper! When done right, the fundraising process requires a dizzying array of forms, contracts, plans and projections.

And when it's not done right? Mistakes can lead to serious and long-lasting repercussions, as Cary Daniel learned several years ago. Daniel says he learned while working in a previous business how not to raise money. "In one angel deal, we raised $200,000, but later, additional funding was held up because we did not do the right documentation," says Daniel, 37. "It took the lawyers a month or two to fix what they [hadn't done right] a year [before]."

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