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How To Raise Capital To Fund Your Business
Raising
capital to start a new business may seem like a daunting
task, but it need not be overwhelming if you follow
a few basic business practices. If you have a viable
idea that will net a return for your investors and prepare
a compelling business plan the chances are good that
you can find investors to join you.
Your first task is to create a business plan, sometimes
known as a “business proposal” or “prospectus.”
Your business plan needs to be very detailed and concise.
You should include information about your educational
background, experience and training in the area of business
you are contemplating. Just like a resume for a job,
include references and any other favorable personal
qualities that you feel reinforce the reasons why an
investor should trust in your ideas.
It
can’t hurt to include any information you feel
comfortable sharing with regard to your positive credit
history. If you have records of various satisfied loans
along with the payment history, that information could
be helpful to prove your stability with regard to financial
obligations.
If
you are requesting financing for an existing business
the rules are a bit different than a new business startup.
The current owner should be able to provide you with
profit and loss statements. If you are purchasing an
online business, statistical information pertaining
to traffic, number of units sold and paid advertising
are definitely necessary. The purchase price of the
business needs to be included along with detailed information
about how you intend to service the debt as well as
how the potential investor will benefit from your request.
If
you are seeking investors for a new business, the information
required increases. In addition to the information outlined
above, you will need to include market research, projected
costs and a detailed summary of how you intend to generate
income. This information needs to be projected for a
period of three to five years. It’s a good idea
to project your expenses on the high side.
Have
some idea of what you expect to pay your investor. The
only reason someone is going to lend you money is if
they can see decent profits in exchange for lending
it to you. Your market research had best substantiate
that your plan is viable and will provide them with
sufficient return on investment to justify their involvement.
Before
you begin your search for investors, it’s a good
idea to have an attorney and/or accountant take a look
at your plan. A good professional may suggest specific
points that you may have overlooked.
Once
your paperwork is in order, it’s time to start
looking for investors. One place to begin your search
might be friends or family. You might approach them
singularly or in a group. Whatever method, you need
to have a complete copy of your proposal carefully outlining
your research and what they can expect in return for
their assistance.
Read
the classified pages of your local newspaper. Venture
capitalists often advertise this way. Their rates are
usually pretty high because they have a tendency to
take on “risky” investments. A twist on this
method might be to run your own ad either locally or
nationally. If you select this method, explain the particulars
and emphasize how much they can expect to receive for
the load of their funds.
Use
local business directories to find companies that specialize
in “investment services.” You can approach
a local bank, but try and find a bank that specializes
in industrial or business type loans.
You
might consider incorporating and selling stock in the
company.
Another
option might be a “money broker.” This can
be risky. There are some legitimate brokers and others
who operate on the shady side.
Be
creative. If you believe in your idea, don’t be
afraid to do what ever it takes to launch. There are
plenty of ways to come up with the capital you need.
Think outside the box. Whether you are looking for $300
or $300,000 the money is there you just need to dig
for it.
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