Potential Investors Come in All Shapes and Sizes
Finding investors is probably one of the more difficult activities you will have to do as long as you own a business. It doesn’t matter if you are just starting a new business and need startup funding or have been in business for years. Locating organizations or individuals willing to invest in a business is the easy step. Convincing them to actually give you the money is the hard one.
There are three ways to get money for your business. You can use your personal resources. You can bring in investors who take part ownership. You can get a loan in which the investor requires payback but not business ownership. Since most people aren’t millionaires, the majority of business funding for start up or expansion comes from outside the business.
Networking with the Right People
Investors come in all shapes and sizes. For example, you can bring in a partner who shares equal decision making authority in the form of an equal partner, but many entrepreneurs prefer to maintain control. But there are other ways to bring in partners without giving up the majority control of the business. For example, you can find equity partners who take a less than 50% ownership stake and will function as silent partners. They have no interest in day-to-day operations as long as their investment brings expected returns.
If you have no interest in bringing in partners, there is a network of organizations, funders, banks, private investors and even other firms looking for ways to earn greater returns than they can get in the marketplace. That is especially true today with interest rates near zero and an uncertain recovery underway. They include business incubators, angel investors, royalties agreements, Small Business Investment Companies (SBICs), venture capital and others. If you are not familiar with any of these sources then you are arbitrarily limiting your search for investors.
The network of funders also includes business loans from banks or other commercial institutions. Many entrepreneurs avoid banks and commercial institutions believing they will not qualify for funding. But there is money available and by developing a high quality detailed business plan with the right elements, banks are much more likely to approve new loans. Assuming up front you will be turned down is self-defeating.
Give Investors Want They Need to Know in Your Business Plan
A good idea for a startup business or for business expansion is not enough. Investors will look for certain things before even considering your ideas whether they are angel investors or equity partners or banks when it comes to business funding.
- Your personal qualities as evidenced by a background check
- The ability of business decision makers to successfully steer the new business or project to success while protecting funding investors have put into the business as proven by past experience
- Likelihood the business or project will be able to pay off the loan or return investor money with interest
- Ability to create an agreement that is acceptable to both the investor and the entrepreneur
- Availability of collateral depending on the type of funding
It doesn’t matter if you search for angel investors or venture capital, it will be necessary to have a well thought out business plan that addresses these components. With a good business plan, you can then join the network of people and organizations that enable new ideas to hit the market and businesses to grow through business loans and a variety of other funding sources.
Shorten the Search Time With an Intermediary
If you don’t know how to find available startup funding or you need the money quickly, your best chance of success is using an intermediary. Though you pay a small fee for the service, an intermediary helps people become imbedded in the network of investors and funders which will greatly increase chances of finding the one or more who can support your business plan.
More detailed information and useful advice about investors for your business can be found at http://www.funded.com.
The Cornucopia of Business Loans
You don’t hear the word cornucopia used much anymore except around the holidays. Did you know that it can mean more than a curved horn filled with vegetables? It also means “an inexhaustible store” and “abundance”, and that’s why it applies to business loans.
You can find plenty of news stories that say that the business of making business loans is almost nonexistent, but that’s simply not true. It may be true if you go down to your local bank and ask for a loan, but what about the bank in the next state or five states over or on the other coast or even overseas? What about the SBA with its menu of loan options designed to help businesses of all sizes? What about private angel investors?
A Changed Lending Environment
The recession did change the lending environment. The days of easy credit don’t exist anymore. All that means though is that you need to put more effort into finding business loans and not that loans don’t exist. In other words, ‘easy credit’ has turned into ‘look harder credit.’
You just need to understand the new places to look for startup funding. For example, the National Federation of Independent Business points out that small banks are still business friendly. But there are so many other sources of business loans if you know how to find them. For example, you could find private investors who are willing to provide startup funding if you have a well written business plan.
It always comes down to knowing where to look. A loan is debt that you repay over a specified period of time with interest. Private lenders like to provide venture capital to entrepreneurs, offer business funding for business expansion and or become equity partners in businesses for one very good reason – they get higher returns on their investment than they possibly could investing in government securities or putting their money in a savings account. Certainly the stock market and currency markets remain volatile and give and take profits day-to-day right now.
Who Is Holding the Money?
What that means is that angel investors and other private investors are looking for entrepreneurs with good ideas and solid business plans and also offer a likelihood of higher returns. But even if you aren’t interested in venture capital, the SBA is offering a menu of loan programs including what they call the SBA 7(a) Loan Queue. This is actually a program in which the government backs loans made by banks to small businesses.
In fact, there is a SBA microloan program that offers short-term business loans for up to $50,000 to small businesses. The SBA loans are made through banks, so once again you must find a bank willing to approve your loan. You don’t have to limit your applications to just local banks though which means you should get help finding all banks without regard to location that are willing to give you business funding so you have a real chance to succeed.
If you are looking for small business financing for purchase of inventory or furniture, working capital, equipment purchases, startup funding or business expansion, then you have to know where the cornucopia is or who is holding the money. There are private investors and banks willing to make loans and equity partners ready to share in your success.
More detailed information and useful business loans advice can be found at http://www.funded.com.
Small Business Funding Is a Searing Hot Topic
Small business funding can’t be called just a hot topic because it’s far beyond hot...it’s searing hot. The National Federation of Independent Business (NFIB) reports that SBA 7(a) loans have fallen dramatically in the last few years. In 2010 only 41% of all businesses were able to get financing from any source, and 16% of businesses didn’t get any credit at all.
You can’t help but wonder how businesses are staying in business when they can’t get credit. But who says they can’t get credit? The fact is that many of those small businesses did get credit from sources like angel investors and equity partners and other sources of private lenders. In other good news, there are probably just as many or more businesses that are eligible for private funding, but they are still pursuing traditional financing routes.
Perfect Conditions for Successful Funding
There is much inefficiency in the lending marketplace which is precisely why there is a thriving private funding marketplace. This marketplace was created because of the mismatch between the number of lenders and amount of capital available and the number of borrowers looking for business funding. It works the other way too. There are borrowers trying to find investors with little success. In a free enterprise economy these are the perfect conditions for creating a thriving market that fills a void.
Small businesses generated 64% of the new jobs in the economy in the last 15 years according to the NFIB. You would think that traditional funders would make sure that small business has the capital needed for job creation, but instead it is estimated that trillions of dollars are sitting idle in banks and corporate accounts.
This is a perfect storm for private lending. If the big companies and banks won’t spend or lend, then it is up to the private business funding market. The private capital market is lending more than ever before for various purposes. There are lenders willing to loan small businesses venture capital and startup funding for example. The private market is also lending in a variety of forms that include business loans, equity partners and angel investors.
Making Sense of Funding
If there is so much money available for business funding then why aren’t more small enterprises taking advantage of this capital availability? There are several reasons.
· Don’t know how to find investors
· Don’t know how to complete a lender worthy business plan
· Don’t understand the variety of capital available in the private market
· Entrepreneurs get discouraged after getting turned down in the traditional lending marketplace
· Don’t want to pay expensive originating fees for business loans
It can be disconcerting to consider approaching equity partners or searching for venture capital without help. It can be just as intimidating to consider presenting a new idea that needs startup funding. It can certainly be frustrating going from bank to bank feeling like a beggar.
Using a central point for finding private business funding makes sense. It is efficient because you don’t have to go from lender to lender, and it is cost effective. Most of all, it offers funding solutions for the very businesses and entrepreneurs that keep the economy growing.
Want more info? Check out http://www.funded.com.
Think of Funding When Writing Business Plans
One of the mistakes made during the writing of business plans is treating business funding as if it is a completely separate section with no real relevance to the rest of the plan. In other words, you write your executive summary, business description, market strategies and analyze the competition in a funding vacuum. Then the financial section gets tacked on, and it basically states you need money and here’s how much money you need.
But investors read business plans closely, and they are looking for a particular type of company that fits their requirements. The words you choose to describe your business and the presentation counts. For example, if you are looking for a business loans from traditional lenders, they are not going to be impressed with hype in the least. You may have the most “stunning” invention ever created that will change the way mankind lives once your product hits the market, but a bank is going to see that kind of claim as marketing hype.
Professional From Beginning to End
Business plans are unique products. They must be interesting, professional and well written while being interesting, entertaining and exciting. That’s not easy to accomplish which is why so many entrepreneurs decide to get professional help writing their plans. Yet one of the most important features that a business plan should have, yet is often overlooked, is funder appeal.
In other words, the funders you plan on appealing to need to be attracted to what you say in your business plan from the beginning all the way to the financing plan. It’s easy to get carried away while writing because you’re excited about your business and finding startup funding. This can lead to the use of a lot of superlatives that make your business plan look like a lot of hype without substance.
Polish the Product
As a entrepreneur you are not a huckster, so the business plan should not make you look like the equivalent of a snake oil salesman. The business plan that makes a lot of wild promises is not going to attract equity partners. Unsubstantiated claims will not get you approval for business loans. Statements that portray you as a gambler will turn angel investors away.
Business plans should be polished products that are consistently honest and give the right impression throughout the entire document. You can’t write a plan that is sassy and reckless and then expect venture capital funding to be approved because you decide to get serious in the section on financing.
Payment and Plan in Full
Polishing business plans also means making sure the plan is complete. You are in a hurry to get your plan done and to find financing, but a condensed plan won’t get you anything except rejected and especially when looking for startup funding. Business plans prepared for venture capital firms or equity partners need to contain all of the important information about your business. The same thing is true for angel investors. If your plan is missing essential information including marketing plan details or financial projections or only summarizes an operational plan, then the assumption will be you have not bothered to work through these details.
The original business plans that entrepreneurs use to find business funding need to be comprehensive plans that are consistent and always keep potential investors in mind. It never pays to skip the details.
More detailed information and useful advice can be found at http://www.funded.com. Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need to access a vast network of business people, entrepreneurs, partners and service providers to help you start, finance and run your business, check out http://www.funded.com.
Venture Capital Is Available…Yes…Even in a Weak Economy
Venture capital is probably one of the least understood funding categories because in the minds of many entrepreneurs it is intricately linked to well-established larger businesses that have great new ideas. Small businesses or start-ups are excluded. Is that true?
It is true that venture capital tends to fund companies that have already shown the ability to generate cash flow. Some funders have lofty expectations as to the kinds of company they are willing to invest in which virtually knocks the new start-ups off their list. But that is certainly not true for all venture capitalists, and the key to finding those funders who are looking for new entrepreneurs is to get help. You can try to find them on your own but venture capitalists belong to the equivalent of a private club, and you can’t just walk in without an introduction.
The next question of course is why should you pursue venture capital if it’s so hard to get? There are plenty of reasons.
Mix and Match Funding
You need X amount of dollars, but does it all have to come from the same funder? Of course not. There are venture capitalists who may adore your business plan but are only willing to fund your project if you consider finding other sources of capital. Find some of those other sources like loans or even family investors and now the venture capitalist is more willing to fund the final amount you need to get your business off the ground.
Even as you pursue angel investors or equity partners you can continue looking for venture capital.
The Give-Give Approach
It just may be that you can make some changes to your business plan that will please a particular investor. No one is asking you to give up your dream idea or your perfect business model. But the fact is that you have to build some flexibility into your plan if you expect to have access to as much business funding as possible.
In other words, an investor may be willing to provide startup funding if you are willing to amend your business plan to accommodate the funder’s requirements. If you think that is not fair since you have a startling new idea that perfectly fits your spirit of entrepreneurship then consider one fact. Even multi-million dollar businesses must agree to make changes to their business plans, products, marketing goals and so on just to please investors.
If businesses with this kind of clout must be flexible, then small to medium sized businesses should expect to have to do the same.
Never Say Never
Venture capital is available for smaller companies or even startups. But it is certainly not the only type of funding available. There are other investors who are looking for opportunities besides venture capitalists. You can consider taking on equity partners, taking out business loans or searching for angel investors. There are many types of investors, and you need to vigorously pursue them.
The bottom line is that you can find business funding through private investors or as business loans whether you need startup funding or funding for a business that is poised for growth. You just have to know where and how to look and what to say when you find it.
More detailed information and useful advice can be found at http://www.funded.com . Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need to access a vast network of business people, entrepreneurs, partners and service providers to help you start, finance and run your business, check out http://www.funded.com.