If you’re a budding entrepreneur or small business owner then you already know the importance of funding and investors. Investors will invest in your idea, helping to fund its growth and development. Unfortunately, most people misunderstand this concept as they don’t quite understand how to go about funding and what potential investors are looking for. The reality of funding for small businesses is really quite simple though.
Basically an investor is someone who will put their money into your business in exchange for some shares in your company. So, if you can’t repay the capital, then you will lose that portion of the investment. However, it’s important to keep in mind that most investors are not only interested in making money, but also in seeing your business grow and succeed. This means that you need to be able to provide regular funds to keep your business viable and growing – if you can’t then you will lose that investor.
So where can you receive capital from if you’re a budding entrepreneur? Most entrepreneurs turn to family and friends for funding. This may seem like the best option – after all, you’ve got everything you need to run a successful business right there, right? Unfortunately, while it is possible to receive funds from these sources, it’s also very likely that the level of support you’ll receive will be very limited.
Private funding from a non-traditional investor can be much more supportive and readily available. As an entrepreneur you may have a few close friends who would be willing to invest in your business, provided you meet their minimum financial requirements. However, if you’re looking for the kind of serious funding that big corporate businesses can typically get, then you may have to look elsewhere. Fortunately, there are several options available for private funding for new businesses. In fact, there are even opportunities to raise capital without ever approaching a traditional investor. In this case, the private funding is obtained from a group of individual investors who are interested in funding your project.
Angel investors are wealthy individuals who invest in startups in exchange for a stake in the company. Unlike a bank or other type of lending institution, angel investors typically want to see the business succeed before putting their money down. As such, they are willing to lend you seed money – not a lot, but enough to start you off in business. While an angel investor can provide significant funding, they are not interested in giving up their initial stake too quickly. They are happy to see the company hit the market eventually, but will hold onto their investment for a later date. For this reason, most angel investors require a significant amount of time and a significant amount of profit before they part with their initial stake.
Private equity firms can be an excellent source of startup funding, if you are able to find one to work with. These companies generally purchase a business that has either been growing too slowly or is just starting out. By investing in your company through a private firm, you can ensure that the business will be kept stable by highly experienced entrepreneurs. These firms will also make sure that you are getting the assistance of top talent to help you grow your business.
