Whether you want to grow a small business, or set up a start-up, you may need investors to help fund this venture. While a small business loan is a good place to start, looking for investors gives you access to funds that generally don't need to be repaid on set deadlines. However, investors aren't likely to finance without expecting anything in return, and you may need to give up some control over your business in order to work with some of them.
Step 1. Write a business plan that you can share with your potential investors before you start looking for them
- Investors need to see that you have thought about your business carefully and that you have realistic goals, and that financial stability is important to you. Your business plan should present the detail of the activities, including a complete description of your company and how it is positioned in the market now, and in the future.
- In addition, it is necessary to present the financial situation within the business plan, including the financial needs and the demonstration of the company's ability to bear the cost.
Step 2. Decide the type of investor you want to find
- For example, you may find an investor willing to take out a small loan for a specific purpose, such as buying new equipment.
- You may prefer a stock investor willing to invest in your business in exchange for part of the ownership and a share of any profits.
- While these are two common investment solutions, you may also find investors willing to invest in other ways. Evaluate the repayment capacity highlighted in the business plan to understand the type of investor you are looking for.
Step 3. Network with other entrepreneurs in your industry to identify investors who may be interested in your business
Even if they are small business owners, this is a solution that should not be overlooked, and contacting the professional and trade associations in the sector will give you a better chance of finding interested investors.
Step 4. Check out specialized finance websites where you can find willing investors
These sites are a relatively new phenomenon and their structure varies. However, the best ones allow firms to prospect loan requests and investors to evaluate requests that meet their investment objectives.
Step 5. Call or visit a university with a strong entrepreneurial program, which typically has the support of potential investors
Talk to the faculty or department staff about the resources that may be offered to you.
Step 6. Investigate venture capital companies
If you have demonstrated success in business and have the idea of creating a new business or modifying an existing one, probably capable of generating significant returns, this may be a good solution.
Many of these companies are looking for investments that can create a 3-10 percent return in less than 10 years. Often, they are more interested in small businesses that have the characteristics and potential for public subscription offerings (IPOs) or to be taken over by large companies
- Even if you're not interested in getting a loan, check out the state's subsidized small business mortgage programs.
- Central and local governments also offer financial support for small businesses. If you are a woman or a young person, or are starting a green business, there are many possibilities and facilities for financial aid.