Coming up with a new business idea can be exciting, but the idea alone won’t be enough to actually get your new business off the ground. Every business needs investors in order to get its feet off the ground. Many entrepreneurs will try to use their own funds, but that likely won’t be enough. By turning to investors, entrepreneurs can successfully start a business without using their entire life savings. But how do you go about finding these investors? Here are a few tips to do so.
Reach out to Friends and Family
Asking loved ones for capital for your business is often considered one of the easiest and most cost-effective ways to find investors. Before you start looking for more official means of raising capital, talk to your friends and family about your company’s needs. You can decide whether you want to take out a loan or have them invest in it. A loan can be easier for both parties, as it allows you to pay it back over time. Investing on the other hand would mean that you don’t have to pay them back, but that they own a stake in your business and are accepting the potential risks that come with it.
Small Business Administration Loan
Established in 1953, the Small Business Administration is a federal agency that helps small businesses get the capital they need. Although it doesn’t provide loans, it has a tool that allows businesses to find lenders that the agency has already approved. The agency also offers various types of loans, which are typically lower interest rates and have flexible repayment terms, as well as grants and free online courses and tools for entrepreneurs. The agency’s website also has a variety of tools that help entrepreneurs grow their businesses.
Private Investors
Private investors are typically referred to as angel investors and venture capitalists. These individuals typically receive a portion of the company’s stock in return for their investments. An angel investor is someone who has the necessary resources and background to make a successful company. If they come on board, they are usually willing to contribute to the company in exchange for a high return. However, this type of investor also expects a high return on their investment. A venture capitalist is someone who is usually needed for a company that’s going through a risky phase or expansion. Unlike angel investors, venture capitalists do not own their own money. Instead, they work with other investors to purchase shares in the company.