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How to find investors for your small business

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Last editedMay 20222 min read

It can be extremely difficult to find investors for a small business. Business loans are often out of the question, since most lenders prefer to deal with more established companies. Government grants are a possibility. However, establishing eligibility can be complex, with lots of hurdles to overcome.

When it comes to securingfunding for a small business, another option is to find small business investors. In this post, we’ll discuss how to find investors for a small business.

How to get investors for a small business

Here are some options to consider if you’re looking for investors for small business.

Friends and family

This can be a practical and achievable solution to get small business investors. You’ll need to be clear what you want, in terms of whether you require a loan or investment funds.

A loan is a straightforward option, since you can pay this back over a set period of time, with interest. If you are looking for investment funds, your friends or family will have a stake in the business and share the business risks with you. They will only get their money back if you make a profit.

Make sure you explain the risks if you’re asking for an investment. If your business fails and a family member or friends loses their money, your personal relationship could be strained.

Private investors

There are two types of private investors:

Angel investors

An angel investor is an individual with high net worth and the right resources to make a company profitable. Companies that are able to secure an angel investor don’t usually need to find another small business investor. These types of investors will, however, expect a good return on their investment and will expect to have a role in the development of the business. If you want to retain full operational control of your business, an angel investor may not be the right solution.

Venture capitalists

Venture capitalists may come on board as a business is expanding. They don’t generally use their own cash, but invest using money from a pool of other investors. Venture capitalists generally provide more money than angel investors, but will also require a high return.

Contact businesses in your sector

You may be able to get investment from someone in a similar field or sector who’s impressed with the company you’re building. While this can involve research and networking at industry events, you could end up being introduced to someone who likes your business enough to invest in it.

Crowdfunding

A crowdfunding platform helps startups obtain funds online. There are different types of crowdfunding platforms. from rewards-based and donation-based crowdfunding to peer-to-peer and equity crowdfunding.

Crowdfunding platforms work by raising money from a “crowd” of people. In return, investors receive rewards or equity in a company. Crowdfunding campaigns usually have set goals and deadlines. Entrepreneurs and startups will need to undergo checks to be featured on the platform.

Crowdfunding is not just a good way to raise funds, but to understand whether there’s demand for your product or service.

Investors for small business: What are they looking for?

Investors will want to establish:

  • Whether your product or service has a USP (unique selling point)

  • If your business plan is watertight

  • Your resources in terms of expertise, education, and experience

  • Financial data, including profits, expenses, and financial predictions

If you’ve been asking how to find investors for a small business, we hope this post has given you food for thought. Finding the right investor can take time and effort, but the potential rewards are great.

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