There are a number of resources available to you beyond individual investors or private funding sources. Sometimes, it is better to seek a SBA loaned it is to find an angel investor. However, a private funding source will not have you put up personal assets as a guarantee. This is an essential part of the capital raising process as well as determining whether or not you need capital from an outside source. HULT PRIVATE Often, you can syndicate your deal as it pertains to raising a large amount of capital although this is uncommon for a small business. A business plan is imperative if you’re seeking outside financing from a bank, angel investor, private funding source, or venture capital firm.
If you are applying for a bank loan then you’re going to need to showcase exactly the tangible assets that are going to be purchased with a capital that you need as they are going to want to place a lien on the assets that you intend to purchase. If you’re already in operation, you should look to take out a conventional loan or a SBA loan prior to looking for a private funding source. The smaller boutique investment firms are willing to work with companies that are seeking $1 million or less provided that you are already in operation. Always make sure that arbitration is available if you have a problem with your investor.
In some instances, you may be able to sell preferred shares of your company is going to give up a controlling interest in your business and this is important to note if you are evaluating all of your financing operations. Hard money is a less expensive alternative to working with angel investors due to the fact that you do not need to give up equity in your business. If you’re going to have a private placement memorandum created, then you’re most likely going to need to have a business plan included within this document if you are seeking to standardize the deal that you are making with private funding sources..
Most angel investors have an investment time frame approximately three years to seven years as it relates to their small business investments. As we have discussed before, if you are seeking to acquire real estate may be in your best interest to work with the small business administration instead of seeking private investment capital. It is important to consider whether the product or service you are offering will be in demand as the current economy has prompted a number of private investment sources to before more risk adverse than usual.
On a side note, almost all private individual investors are considered to be accredited by the Securities and Exchange Commission and you should be sure to work only with accredited investors when you are seeking capital for your business.
Matthew Deutsch is a prominent business plan writer. His work has been included in nine books pertaining to this subject. Additionally, Mr. Deutsch has written extensively on subjects regarding entrepreneurship, small business lending, angel investing, and other related topics.