Whenever considering any sort of capital raise, whether debt or equity – it is a basic requirement to have your house in order. This means that the proper entity papers have been filed with local and Federal agencies.
If there are multiple owners or founders and individuals are exciting, the updated internal ownership documents should be in place. Any amendments need to be filed with your local State agency and they must acknowledge your filings with a stamped letter. You can’t have the company listing showing owners who are no longer affiliated with the company. Usually this happens because the split is amicable and nobody got around to making the changes and filing the papers.
Additionally it is very helpful for all ownership documents (or even a copy of them if they are normally stored at your attorney’s office) be housed in an easily accessible place. Too often the rush to get funding gets bogged down by trying to retrieve these essential documents.
Included in this would be knowing exactly what UCC-1 filings have been made on your company. Who filed and what collateral is being held. A factoring company cannot begin to finance accounts receivable until the factor has first position on the collateral. Again, hunting down old filers to get them to terminate ancient filings can be a drag on the efficiency of starting up the factoring.
So don’t procrastinate filing your corporate paperwork, and make sure you have acknowledged responses from the agency overseeing corporate legal filings.