Tips for finding investors for your small business
You’ve got an idea and the drive to turn it into a reality. But you need more than ambition and passion to transform a concept into a thriving, successful business. Namely, you need capital, which you can obtain with the help of investors.
If you’ve never struck out on your own and started up your own business, you may not know where to start. But there are several different avenues that you can explore to find investors — many of which you can take at the same time to maximize your potential for success.
Start locally and build from there
Business investors are more likely to throw in on your business if there’s a strong guarantee that they’ll receive a return on investment. So if you’re starting from next to nothing, you may need to start smaller when searching for investors.
Business.com contributing writer Matt D’Angelo recommends starting with friends and family when you need startup capital for your business. If you turn to people who you’ve already told about your plans and vision, they may be more likely to help you get started because they’re familiar with your aims. Of course, they’ll also be compelled to support you because of your relationship to one another.
By that same token, turning to friends and family when you need to borrow money can be risky. If your business venture doesn’t earn their initial investment back fairly quickly, it could lead to strained feelings and even strained relationships.
Turn to your potential customers
Do you have an idea that you think has a built-in audience and the potential to hit the ground running? You may want to explore crowdfunding as an option because it takes your customer base and makes them ostensible investors in your product or service.
Investopedia contributor Tim Smith notes that crowdfunding is typically rewards-based — in essence, backers will support your project in exchange for some product. If you’re building a business around a small catalog of products, you can offer backers the opportunity to buy in at increasing levels that earn them more of what you’re selling.
Smith notes that Kickstarter, GoFundMe, and IndieGoGo are three of the most popular crowdfunding platforms. As you might expect, these platforms will take a cut of what you earn, so that may be a consideration as far as where you set your funding goal. If you turn to crowdfunding, it will also require a different level of work on your part. Backers will be more interested if your business markets itself well, so you’ll need to be a bit more creative in terms of how you pitch your product.
Explore SBICs
An SBIC, or Small Business Investment Company, is an entity licensed and backed by the Small Business Administration. As the SBA website notes, an SBIC invests in small businesses via debt and equity, pooling the funds of private investors with a two-to-one dollar match from the SBA.
According to the SBA, an SBIC loan can range from $25,000 to $10 million depending on what you’re funding. These loans break down three ways: debt, equity, and debt with equity. SBIC loans have a relatively low interest rate — debt loans cap at 16% interest — with a three-year term. The SBA website offers ample safe resources to find an SBIC as well as tools to help you build a winning business plan.
Need help finding investors to get your business off the ground? You have several other routes to take, including venture capital, angel investors, and business accelerators. Talk to your financial advisor to learn more about the roads you can take to arrive at the destination of a booming business.
The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.
Source: IMakeNews, Inc.
