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One of the greatest challenges of starting up and sustaining a small business is to find suitable sources of funding. The entire process of finding suitable business investors for your business can be extremely daunting—and with good reason, for the future of your business largely depends on your success in accessing additional sources of capital.
While the task itself is daunting, the best way to tackle it
is to be prepared. When looking for business investors, you must know what to
look for, where to look for and how to look for them. But most importantly, you
should be able to know what they are looking for from you.
Who are Business Investors?
Business investors, in a nutshell, are individuals or
companies that offer financial assistance to new and upcoming businesses by
providing the capital required to run the business.
Before Looking for Business Investors
The most crucial step in obtaining funding for your business
actually takes place before you even start looking for investors. Why? Because
it is at this time that you learn to put your best foot forward. To do this,
you must first draft a business
plan that is not only comprehensive but also takes offers contingency plans
of action. In your business
plan, you’ll need to provide a brief company overview and outline the
services your business offers. However, what investors actually look out for at
this stage is your analysis of competition and the current industry situation.
In addition to this, clearly mention any financial assumptions you’ve made. If
your business is already up and running, it will be a good idea to insert any
relevant financial statements.
Where and How to look for Business Investors
The first step, obviously, would be to ask your immediate
circle of friends, family and colleagues for recommendations. This will save
you a lot of time in terms of searching for a suitable business investor. In
addition to this, when looking for business investors you can also:
- Approach local commercial banks
- Apply for a loan or grant from government agencies e.g. U.S. Small Business Administration (SBA)
- Contact local angel investors, who are always on the lookout for startups
- Enter into a partnership with friends or family
Analyzing Potential Business Investors
Approaching Business Investors is easy enough. But how do
you know which one is right for you? What aspects do you look for when
approaching a business investor?
While there is no hard and fast rule, there are some ideals
you can generally adhere to. Firstly, if your startup is a bit more risky, you
might want to spare yourself the effort of applying to local banks which
generally tend to play it safe. In such cases, always opt for angel investors.
In addition to this, you’ll need to do a quick background search on the investors
to ensure that they haven’t been involved in any form of misdeeds, because any
scandals could tarnish the reputation of your company. Also, investors
sometimes offer great networking opportunities and sometimes also provide other
forms of support and legal advice to budding entrepreneurs. Hence, if given the
option, you might prefer the investor who offers all these perks!
Hence, while looking for investors is no easy task, its best
to make careful and systematic decisions when choosing a business investor.
After all, the future of your company rests upon this decision.
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