This is a guest post by Evan Fischer
Whether you’re looking to open a brick-and-mortar location or you’d like to transact all of your business online, you’re going to face many of the same hurdles when it comes to finding individuals and entities to lend you the money you need to get started. But starting an internet-based business will give you something of an edge for the simple fact that your costs are likely to be far lower without the overhead required by a lease, utilities, and employees needed to run a store. Don’t get ahead of yourself, though; you may be ahead of the game but you’re still going to have to do the leg work. So here are a few tips to not only help you find investors, but find the right ones.
For starters, you’ll want to prepare a solid business plan. Without this key documentation to lay out your market research (proving a niche for your business), provide a step-by-step outline of how you’re going to proceed, and forecast future earning, you won’t have a leg to stand on when it comes time to present your case to interested parties.
So if you haven’t gone to business school and you don’t have the foggiest notion as to how to go about formulating and formatting this plan, look online or at the library for tutorials and templates to guide you through the process. Otherwise you’ll have no hope of nabbing investors. Your next step should be to approach lenders (banks) about securing a loan. This is the most common way for a business to secure the financing needed to get off the ground so it couldn’t hurt to at least check it out. The nice thing about a bank loan is that you’ll be working with a reputable entity, you’ll have a set interest rate, and they won’t interfere with you running the business. Of course, the amount of a loan is based largely on your personal credit, so if your credit score is low this may not be an option for you. But it should definitely be your first choice. From there you can consider other types of investors. You should start with friends and family, who no doubt have an interest in helping you to succeed. Here you need to tread carefully because an inability to pay these people back (and do so in a timely manner) could end with your personal relationships in ruins. But on the upside, people you know and love are bound to offer you lower interest rates and give you some wiggle room on late payments. Loans from your family may not be ideal, but it’s definitely something to think about. Of course, there are many other types of investors in the world. Angel investors might be a good choice because they are often local business people looking to help up-and-coming entrepreneurs within their own industry by offering not only financial assistance, but also acting in a mentor ship capacity. You might also consider venture capital firms if your idea requires a lot of money or you have already started a business and you’re ready to take it to the next level in a proven market. While these firms will likely require you to hand over some control of operations (decision-making), this could be a better way to get funding than say, unsecured loans (which come with incredibly high interest rates) or maxing out credit cards. Whatever type of lender or investor you go with, just make sure that it fits your business and your personality since you’re going to be in bed with these people for a good long while.
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