This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
From this same source, the speculative public, must come the capital of small enterprises. After an enterprise has passed the stage in which the capital is furnished by those directly engaged in the enterprise, if the business itself is worthy and sufficiently profitable, there is no good reason why it should ever fail from lack of sufficient capital. The difficulty in most instances where needed capital is not obtained, consists in the very common delusion that the capital is to be sought far away from home. When one of the enormous, nationally known corporations, with years or perhaps generations of success behind it, desires to obtain some millions of dollars of fresh capital, its officers enter into a contract with some banking firm which undertakes to furnish the capital and which in turn disposes of the securities of the corporation among its own clientele. This is the big-scale method of raising fresh capital from the speculative public. The actual work of selling the corporate stock is not performed by the corporation's officers. All that they need to do is to make the right kind of contract. Often the manager of a small local corporation forms the idea that he should and can raise his capital in the same impersonal way. He altogether forgets that his neighbor Jones has just sold a farm and has $10,000 lying idle in the bank; that his customer Smith is a good personal friend of his and can raise any reasonable amount of money; that his employee Brown is building up a good-sized savings account and would save more and work better if he were stimulated by the pride of owning an interest in his employer's business. Instead of interviewing Jones, Smith, and Brown, with money in their pockets which they would willingly exchange for shares in his enterprise, the corporate manager of the type we have in mind is apt to think that some broker in a distant city could easily raise the $10,000 or $50,000 that is needed if he could only be persuaded to undertake the job.
The best place to start in looking for purchasers of speculative or semi-investment securities of a small corporation is among business acquaintances of the men who are already interested in the corporation. After a few of these acquaint' ances have themselves become shareholders, they will cooperate in reaching other people, and so the list of prospective purchasers of the securities will expand in an ever-widening circle until the whole amount of the capital required has been raised. The best person to whom to turn for advice, ordinarily, is the most progressive banker in the community or - if it is a large city - the bankers best acquainted with the trade in which the corporation is engaged. It is the banker's business to know the financial standing of his customers. If he is willing to say a good word for the enterprise, it will go a long way. At any rate his advice will be worth having. It may be safely said that any corporation which has a really attractive offer to make to the stock-buying public need not apply in vain.