The Mysteries of Money Matchmaking

Brokering formal investment deals can be lucrative, but you'll need the right credentials -- and the time to do a thorough job

Byb Karen E. Klein

Q: I would like to help individuals and companies find people who are willing to lend money or invest with them. My company would charge a finder's fee of between 1% to 5% of the total transaction. I don't know a lot about this business and what kinds of legal restrictions or qualifications apply, if any. Can you give me some background? -- J.R., Orlando, Fla.


Money-matching such as you're describing is common, and most people who do this for friends and associates don't bother with formal designations or licensing. But if you want to become a professional "finder" of money -- an investment banker, in other words -- you do need to be licensed as a broker/dealer, a process that involves finding a sponsor and passing the required exams. The licensing not only assures clients that you have the financial expertise and are schooled in the ethics and standards of the profession, it also helps you to get paid if a transaction ends up in dispute. You can get detailed information on licensing requirements from the Securities & Exchange Commission Web site.


  Going through the licensing process also will help you determine the right fee structure, educate you in clients' typical expectations, and show you how to put together a good contract. Because of the funding business' complexities and nuances, it is a difficult profession to pursue on a part-time basis, says Peter Cowen, an investment banker with Peter Cowen & Associates, in Westwood, Calif. "You work on a few deals, and some work out well, but others you put a lot of time into and they fall apart," Cowen cautions. "It does take some time to build a reputation for doing deals and generating leads."

Cowen recommends going to work for someone who is already successful in the business, allowing you to learn the ropes before going out on your own. "Remember, small deals are as troublesome as big deals," he advises. "if you are working on a lot of small ones, you should realize that a percentage of them simply won't close. You need to do a cost/benefit analysis to see if certain deals are worth undertaking or not, rather than jumping into every deal that comes your way."

While it can be tricky, investment banking is also a fascinating and dynamic business -- whether you are finding capital for large companies or small ones, Cowen says, and it can prove lucrative if you are successful. He recommends sticking with a familiar industry. "Choose something that you know well and where you already have some contacts," he recommends. "Then attend the conferences and events that are organized by that industry. They are great places to meet people face-to-face and establish yourself."

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Karen E. Klein is a Los Angeles-based writer who specializes in covering covered entrepreneurship and small-business issues.