According to the U.S, Small Business Administration, funding your business is the first and most significant financial choice most business owners make. However many people think that there is no hope for attracting investors to a small business, and therefore, see the pursuit of one as a futile effort. Though, this may not be true for every situation because not all investors are the same. In fact, the Maine Small Business Development Centers annual report of 2020 revealed that 2,956 entrepreneurs and small-business owners had received advice and capital support for their business. When it comes to looking for business investments the first step is to make a list of goals and needs. What are the qualities you’re searching for in a potential investment? Is it low-risk, high-yield, or long-term with slow but steady growth? And most of all where are you likely to find business investors? These questions will help you narrow down your search and make an informed decision. Here are 3 places to look for business investment.
Angel Investors
Angel investors are a type of individual investor that provides capital in the form of equity to startup businesses. They often provide funding for smaller companies than venture capitalist firms, which means they are usually more interested in the potential for higher returns. Additionally, angel investors are always willing to risk it on new ideas that have the potential to make their investment worthwhile. In most cases, the money is provided in exchange for an equity stake in the business.
Venture Capitalists
A venture capitalist (VC) is an individual or firm that provides capital for new, emerging enterprises. In return, the VC normally gets a share of the company’s ownership and/or a promised rate of return on their investment. Venture capitalists take the lead on funding up-and-coming startup companies. They use their own money to invest in early-stage companies that have a great opportunity and a large market share. Also, with the help of tools like equity simulators, founders take into account the impact of future rounds of funding from various ventures. Venture capitalists also specialize in finding great ideas, building teams, and helping them to grow. Their goal is to create bigger and better businesses than their competitors. A venture capitalist can also join an investment fund to increase exposure and diversity of opportunities.
Debt Capital
If you are unable to secure financing from banks or other financial institutions, you can still raise equity capital by issuing debt securities. This is usually done through a private placement memorandum (PPM) in which the company provides a detailed description of the business, along with their financial forecasts and information about the management team and business model. Investors will decide if they want to invest in your business on the basis of this information.
Unfortunately, getting investors is not always a walk in the park. If you don’t have a business plan that is well thought out and properly executed, then it’s unlikely that people will want to invest their hard-earned money into your business. The good news is it can be a great help to have an experienced business advisor nearby to guide you along your path.
