Journal: How to get a company started in this economy...

Man, talk about bad luck... I've been working on an enterprise software product for several years. I built a prototype a few years ago; but it was not a marketable product for several reasons. Finally, in 2008, I thought we had everything set; we had equipment and enough money to operate for 6 months or more. So, I started working full-time on the project/company. Over the last 6 months I/we have finalized the design (URD, SRS, and project plan), and submitted a provisional patent. I even have an experienced executive team who have all left their other jobs and started working for my company pay deferred until we get funding, because they believe this product has so much potential. Without getting into the details too much, the application is innovative, feasible, not obvious, and highly marketable. To learn more, visit our website at http://www.fossatec.com/.

However, because of the economic maelstrom we are in, now we can't get funding because the banks aren't lending and investors are skittish. We have had offers for small amounts (< $20K for 30% of the company), but I feel that their expectations are too high for that amount. That small of an amount doesn't get us very far, and we can't afford to give away that large of a slice of the pie. Personally, I have impeccable (750+) credit and I'm a veteran (Desert Storm), so I qualify for the Patriot Express program. But, surprisingly, banks won't lend even when the SBA will back 85% of the loan. They won't take real estate and/or IRAs as collateral, either. We have even demonstrated how we will generate revenue to cover the debt by consulting, which has been the primary income for several of for the last 15+ years.

So my question to other /. entrepreneurs is: what innovative, but sensible, ways have you found to get a company funded in this economy? One idea we had was to find an investor that is willing to co-sign for a Patriot Express loan, which the local EDC may match. Under this program we could get $500K, and the SBA would back 75%. So the investor would be risking (not actually investing) only $125K, at most; and with the EDC and/or other investors co-signing it would be a fraction of that.

Similarly, what would you advise a person to look out for when trying to raise money? Scams? Bad investors? Traps?