To the Memory of HARVEY LEE SELLERS MY FRIEND OF MANY YEARS, WHO GAVE MUCH TO THE MAKING OF THIS BOOK, AND WHOSE WARM HEART, READY HAND, AND FINE COURAGE HAVE BEEN TO SO MANY A HELP AND AN INSPIRATION 389158 PREFACE Under proper conditions it should be possible to finance any really good enterprise. As a matter of fact numerous enterprises are financed that cannot be designated as "good," and many are financed that are not only destitute of merit but absolutely fraudulent. While all this is true, failures to finance enterprises are constantly occurring even where the enterprises have real merit and the conditions are fairly favorable. Such failures can be ascribed only to a disregard or ignorance of the principles and procedure of successful financing. The object of the present work is to set forth these principles as clearly as may be, to outline the requirements of a successful enterprise, to suggest methods of procedure, and to point out the mistakes more commonly made. All this, while naturally applicable to the financings or refinancings of the larger and more stable undertakings, is not primarily intended for their use. Such enterprises can employ the services of technical experts in every line and command the attention of investment bankers. But the great multitude of enterprises to be financed are neither large nor stable. On the contrary they are small, undeveloped, or speculative—they lack the funds to employ experts and the qualities to attract investment bankers, and it is for such enterprises that the present work has been written. The author must confess to much sympathy with these lesser enterprises whose promotion is so frequently undertaken by men unskilled in financial matters; by men of little experience; by men greatly in need of money-those enterprises unable to secure the able, expert advice and assistance which smooth the financial way of the better established or more fortunate undertakings. These small financings are, in fact, quite as important to the future wel fare of the country as those of greater immediate moment, for they make up in number what they lack in individual amount, and it is from these small and often doubtful beginnings that the great enterprises grow. Standard Oil was at one time a struggling enterprise struggling, it is true, to strangle its competitors, but nevertheless struggling; the Bell Telephone, one of the great commercial organizations of the country, was at its inception small, scorned by the business man, and of dubious future; the National City Bank, one of the great financial institutions of the world, was in its early history comparatively unimportant. To sum up the matter briefly, we must have the acorn before we can have the oak. As the effective presentation and successful financing of an enterprise are not possible unless the points of view of both the man with the enterprise and the man with the money are known, the present volume treats its subject, so far as may be, from the standpoint-often widely divergent of both parties. At the same time the work is written for the use of the man with the enterprise, and is neither designed nor intended to serve as an investor's manual. When any practical work is published, and especially one on a financial subject, those who use the book naturally and rightly wish to know from what knowledge or experience it has been written. In response to this demand the author may say that for some fifteen years he was engaged in legal work connected more or less directly with the financing of enterprises-work which brought him in contact with a very wide variety of promotions, with almost every phase of promotion procedure, and with all the ordinary and some very extraordinary-methods of raising money. Since then, though not connected with promotion work, he has maintained his interest in current financing. From this general knowledge he has written. When the first edition of "Financing an Enterprise" was published in 1907 it was, for business reasons, issued under the name |