Finding investors for a start-up business can be very challenging. The greatest factor determining the risk associated with investing in a business venture is the prior performance record of the business. Obviously, in the case of a start-up business there is no track record to evaluate. The ideal way to begin a business venture is to self finance the project until you can provide potential investors with a clear record of success. In the case that self financing is not possible, one may choose to approach family members and/or friends to offer the chance of investing in your business. This can be risky though. If there is not a clear understanding when it comes to the risks associated with investing in a start-up venture, relationships can become strained if not broken.
Another option may be to approach a bank or other lending institution with your request. Typically, lending institutions will require the borrower to provide collateral in order to protect their investment. Collateral for loans may include any of the following personal assets, home/real estate, vehicles, bonds/securities, etc. . Another factor these lending institutions will take into account is a well prepared business plan. Having a business plan available for the bank will also instill confidence as it pertains to the management team or individual seeking investors.
The government is another avenue to explore. The Small Business Administration is available to those having difficulties securing financing by other means. The United States government will also require the applicant to provide a detailed business plan. Start up costs should be carefully determined prior to requesting financial assistance. Consideration should be given to one time costs versus on going expenses. Some one time costs include an office rental deposit, a sign for your office and cost of incorporating your business. On going costs include rent, utilities, office/manufacturing supplies, insurance and many others.
