Alex Lopez on June 2, 2016
Best Ways to Find Investors for Your Start-up Company
Financial backing for a new business is often essential for getting it off the ground and running. Fortunately, we’re living in a day and age where there are more options than ever. You just have to know where to look to find investors for your start-up company.
The concept of crowdfunding is a relatively new one that has largely been made possible by the Internet. According to Investopedia’s website, “Crowdfunding is defined as ‘the use of small amounts of capital from a large number of individuals to finance a new business venture.'”
It’s simple. You launch a campaign on sites like Kickstarter and Indiegogo and explain the premise of your small business. This typically includes:
- The specifications of your product/service
- How much money you’re trying to raise
- Background information on yourself and business partners
If it’s well received, multiple investors will contribute small chunks of money that when combined will hopefully equal the amount of capital you’re seeking. The caveat is that investors usually expect something small in return such as a product sample. This is a great option considering that you won’t get stuck repaying the money along with a stiff interest rate.
While a microloan probably won’t be viable if you need a lot of funding (more than $50,000) it can be sufficient if you only need a minimal amount of money to get going. The average microloan is around $13,000, allowing many entrepreneurs to fund a key component of the business.
To obtain a microloan, you can go directly through the Small Business Administration. They can match you up with participating intermediary microlenders. From there, you will apply for a microloan. If approved, you will usually pay between 8 and 13 percent interest with a maximum repayment time of six years.
You can find more information on this process by visiting the SBA’s website.
If you’re looking for an alternative to a traditional bank with a lot of restrictions and steep interest rates, online lending is something to consider. Websites like OnDeck and Prosper allow you to apply for a small business loan with relative ease. If approved, you can obtain anywhere from a few thousand dollars to a quarter of a million in some cases.
Family and Friends
Finally, you may want to consider asking family members or friends to invest in your business. If they have money to spare and are genuinely interested in your business proposal, this may be all it takes to secure funding. You’re also more likely to get favorable repayment terms when going this route. Just make sure you have a tangible game plan in place before approaching them.
With multiple ways to find investors for your start-up company, you stand a good chance of obtaining the financial backing you need. This important step allows you to get your business up and running with minimal friction, turning your vision into a reality.