2.1. Finance Seekers
Those seeking financing include:
- Special purpose vehicles
Most people seeking loans or equity investments are not finance experts. Instead they tend to be entrepreneurs with a good idea and/or skill set with which they want to start or grow a business. As such, many finance seekers do not naturally speak the language of finance and are not conversant with the requirements of investors or lenders. They may not know how to construct a balance sheet and/or to develop financial projections.
In developed countries such as the US, this problem is mitigated by an array of business services providers (accountants and business consultants) and local and national organizations whose focus is helping small businesses. In developing countries, these resources may not exist to the same extent.
A compounding problem is wealth. Lenders require collateral and/or a layer of equity (someone else's capital) underneath the debt they will provide, in order to provide a cushion. Many entrepreneurs do not have the ability to provide this.