A vital part of starting or growing a small business is to seek the right funding. The process can be very confusing and frustrating to entrepreneurs, who have no idea how to start looking. In order to avoid common mistakes, there are a few simple guidelines to follow. Funding sources should be considered “liquid” – meaning that they are easily available to the lending institution.
Investors are one of the best sources of venture capital. An investor usually identifies venture opportunities based on the entrepreneur’s industry, track record, and potential. Because of this common method of identifying investment opportunities, it has become customary for banks to advance funding to most new businesses within a week of their submission to the bank. (A more detailed explanation of how this funding works is provided in our Press Release.)
Private investors are almost as common as banks in the venture capital market. Investors use a variety of methods to obtain capital for their companies. A primary source of private funding is a private investor. However, there are also a variety of sources of venture capital such as venture capital loans from banks or other lenders, equity loans from other private sector investors, and access to venture capital funds through early-stage companies or public companies. Depending on the type of financing sought, there are specific steps that an angel investor must take to ensure the best funding choice for their company.
When contacting potential investors, it is important to provide an extensive financial and business background. This information should include the amount of the funding sought, the expected revenue, and the method of application. Depending on the type of funding sought, the investor may also need to provide a credit application, including the lender’s preapproval process. Additionally, potential funding sources should be made aware of any previous experience with the organization, as well as any personal recommendations.
One of the best ways to find the right investor is to network. This includes working with current and former investors. By communicating with them regularly, finding a funding source becomes much easier. Additionally, by being actively involved in investment groups & networking events, one can develop relationships with individuals that can prove beneficial. When securing funding from a private investor, it is important to consider their investment decisions carefully due to past experience & track record.
Angel investors typically have a strong passion for a specific industry or company. As such, they often make a great investment since they can significantly impact the profitability of the business. However, it is important to note that it takes a long time to attract and fund successful companies. Therefore, it is essential to have a strategic plan in place to determine the level of support you will need down the road. Additionally, prior to raising funding, it is important to thoroughly analyze the industry in which you intend to invest. For more information regarding capital funding for small business, contact Investor Relations at Equity Office, a trusted provider of finance to entrepreneurs & small business owners.