Finding investors for your business is one of the daunting tasks that fall on your lap as an entrepreneur. It’s simply something you cannot delegate to a subordinate or one that you can avoid since you’ll need to secure funding to continue day-to-day business operations. Luckily, it doesn’t have to be an intense “Shark Tank” type experience. Here are three ways to find your next investors.
Approach Family and Friends
Family and friends are a good first stop for a business loan or investment capital. You will likely get a better interest rate and repayment terms compared to what your local bank or a private investment firm would offer you. The challenge with asking family and friends for money is often an awkward conversation to initiate. You don’t know how you’d start that sales pitch. You can begin the conversation via a phone call, text, or email to request capital from a family member, friend, or colleague. You can invite them for lunch or dinner where you can do a presentation.
Request For an SBA Loan
The Small Business Administration is the largest government agency built-in 1953 to set standards and help small businesses. While SBA does not lend out cash to business owners, they have a lender matching tool on their online portal that bridges business owners with legitimate lenders. The SBA also guarantees specific loans, so lenders are more comfortable providing the cash at a lower interest rate and more flexible repayment terms.
Private investors are divided into two primary groups – venture capitalists and angel investors. Both groups can give you funding in exchange for a certain equity percentage of the company. One of the key differences between the two groups is that venture capitalists do not use their capital to fund investments. Instead, they use capital pooled from investors. On the other hand, an angel investor is usually a high net-worth person who has the resources to nurture a company’s growth.
There are many other ways to get the funding you need to launch your startup – crowdfunding platforms, such as Kickstarter, incubators, and accelerator programs. Understand the pros and cons of each option before making a final decision.