Getting funding can be one of the most frustrating and time consuming experiences for a business owner. When you want to be working on growing your business and generating sales, instead you have to talk to investors, visit banks, write business proposals and generally jump through hoop after hoop trying to fit the needs of a investor when in fact what you want, is someone that will fit your needs. In this article I’m going to go through the basics of what to look for in an investor.
Banks, Government or Private Investors?
Although banks call them loans, Governments call them grants and private investors call it “funding” it’s all the same thing! Money to grow and expand your business. So the first step is to decide if your government or a bank will help you. Generally its easy to see if you have the type of business they would invest in. Banks generally don’t give money to anyone post 2008, so unless you have been in business for a couple of years before with strong books and showing good growth and profit, they won’t invest. Governments are slightly different but again there are countless forms and elements to look at. The type I recommend the most is private investors; you can find these almost anywhere but there are a number of sites online to check out, simply Google private investors UK or your specific area.
Amount, Equity and Repayments
Repayment terms are extremely important. 1 year might seem like a long time, but in the business world it really isn’t. Aim to get loans or funding for over 3 years with flexible repayment rates and terms. Amount is obviously very dependent on what you are trying to do. If you need a high amount to start but then will likely not need much for the remaining time you are with a particular business, then you should explain this. This is usually the case with gyms and restaurant! If you require a large sum that will be spent more slowly, explain this to a potential investor. Equity is another conversation you should have with a potential investor, sometimes individuals will really believe in your business and give you a loan in return for a percentage of your business. This is needed, even huge brands such as Apple had a $90,000 loan to give up a third of their company!
Consult third parties
Before getting into bed with any investor or getting a loan you should always consult a third party, whether this be a friend, family member, accountant, lawyer or anyone, you must have another opinion that isn’t bias like yours! There are also a number of business forums, such as mylocalservices that has great guides on how to acquire finances for your new start-up, regardless of the industry or niche you are in.
Generally you should always have more funding than you think you need. Although this might make it more difficult to achieve (and trust me from personal experience when I say this i a pain in the a**) BUT once you have the funds you can grow your business at a rapid rate. Ensure your investing party is reliable and understands your business plan and also try to keep in touch with them even on a personal basis to tell them how well the business is going. If they would like to re-invest again they might actually want some equity in a fast growing industry!
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