Getting a business going is the dream of every entrepreneur. Unfortunately for some, finding safe sources of money can be the one thing keeping them from pursuing their dreams. Safe sources of funding not only help startups get going, but they can help them get over the five-year hump that takes out many small businesses.
If your business is already started, but you need investment money to take it to the next level, you also have a challenge. You might have to take on debt or give up a share of your business. When looking for money for a pre-existing business, the investors will take several factors into account, including the age and performance of the business. They will also want to know what your market is and the opportunities for growth.
These seven tips will help you find safe sources for business investments. It is best to find the perfect fit for your business and financial needs.
1. Review and revise your business plan
While writing a business plan isn’t a guarantee that your business will be successful, it does show potential investors that you actually have a plan. Before you turn to potential investors to ask for money, take a close look at your business plan to see if it is viable. Look closely at your startup plans and how you plan to keep the business going for the first five years.
Then, make changes that will entice an investor. Conduct research about your market and clearly show how you plan to take your small business and make it scale. Create a budget and show how you plan to function within its confines. Investors want to see how you plan to spend money to make money. Investors don’t want to give away capital, they want to make money off of it.
2. Use an online financial source
Some companies focus on investing in businesses. You can find more information at equifyfinancial.com. Investment websites like this are dedicated to helping businesses get the equipment they need so they can take their businesses to the next level. Equify Financial looks for reasons to invest in a business, while others look for reasons not to invest in a business.
3. Consider crowdfunding
If you have a product that will get the attention of the general public, you might consider crowdfunding. Of course, to get money from the crowd, you have to offer something to the crowd. If you entice the general public with rewards that they cannot resist, they will invest in your idea. As long as you eventually bring the product to the marketplace, this is a safe form of financing that has proven to help businesses find success.
Crowdfunding will quickly tell you if your idea will succeed. Crowdfunding websites can be geared toward investors or the general public. If neither group shows interest in your idea, then your idea probably won’t make money in the long run. Or, it might need a subtle tweak to make it an idea that people will consider supporting.
4. Find a strategic partner
Sometimes you just need a partner. When you work with a partner, you not only get a second brain to bounce ideas off of, but you also get a second wallet. With a strategic partner, you also reduce your personal liability, because both of you are on the hook for the business.
The problem with a strategic partner is that you do have to split everything, unless you decide to use a different partnership. If you do decide to find a partner, be sure you set everything up with a lawyer so that you can work through issues before they arise.
Often the best strategic partnership is where each partner brings something unique to the table. You might be the person who works with marketing, hiring, and sales. Your partner might be the person who works well with finances and accounting. If you’re both good at the same things, then the partnership might not be needed. Consider each other’s roles before you commit to sharing the business.
5. Turn to your local bank
If you have a relationship with your local bank, you can always go there to ask for an investment. Banks do have to follow protocol, so they might have to offer the investment in the form of a loan. Or, they might want a percentage of your business. Banks are generally safe sources for investments, but you have to play by their rules.
6. Try the SBA
The Small Business Administration provides loans to small businesses that need money to startup or to grow. They usually back loans from commercial banks. They also require the business owner provide a percentage of the capital for the project. To keep their interest rates low and their funds guaranteed, they require that businesses put up assets for security.
SBA loans are usually approved within a week, so they are a good source of quick funding, as long as the requirements are met. If you cannot get a loan through a local bank, look for a local bank that uses SBA money.
The SBA does have strict rules for repayment and default. In many cases, if you default on an SBA loan, you might need to try to restructure the loan. Otherwise, the federal government will put your business and you into collections.
7. Use your money
Another safe source for business investments is your own money. If your business has made profits, you should be able to reinvest the money into the business. If you are starting a new business, most lenders and investors will ask that you put some of your own money into the project. This shows investors that you believe in your idea and are willing to take some risk to get it going. If you are unwilling to take a risk with your own money, why should a complete stranger give you money?
Some people prefer to use a personal credit card as a safe source for business investment. Consider the interest rate before you use a credit card. If you do use a credit card, set up a payment plan so you do not accrue an excessive amount of interest.