How to Find Small Business Investors

Finding the money to get your small business off the ground or help it expand is no easy feat in this day and age. With the recession dragging on and lenders remaining stingy with the loans, you might not be able to pursue traditional means of obtaining business funding. And yet, you don’t want to give up on your dream of starting your own business, or let your current company fall by the wayside because you can’t come up with the money needed to expand. So you’re going to have to look into other types of capital infusion, mainly in the form of investors. Here are a few ways to find these elusive creatures.

A good place to start is with family and friends. The people who know and love you, those who have a vested interest in your ultimate success, may be willing to put their money on the line in order to help you realize your professional goals. In addition, any money they invest will likely come with fewer restrictions than you would face with another type of lender (reduced interest rates, leniency with the payment plan, etc.). However, you need to be careful any time you mix business with pleasure. Any failure on your part will not only cause problems for you, but also for those who have invested their money in your business. And if you are unable to repay your loans in a timely manner, you may end up damaging personal relationships. It’s just something to consider before you put your hand out.

You might also want to look into venture capitalists and angel investors. Venture capital can be difficult to secure because you generally have to have a fairly successful business already in the works, with a proven market for growth. The upside is that you can generally aim for high numbers in terms of the loan amount (potentially in the millions), although you will have to submit to the scrutiny (and probably input) of the investment firm.

Angel investors, on the other hand, are a bit of a different story. They are often local business owners with excess money that they are looking to loan to entrepreneurs in the same field (who are just starting out). They not only lend their money, but also their expertise to your operation by basically mentoring you as you start your business. They usually won’t offer a ton of money, and you will have to meet with their approval in order to qualify (like any type of loan, really), but they are the kinder, gentler members of the investment world.

Of course, you could always skip investors and opt for an unsecured loan, which requires no collateral (but generally come with a ridiculously high interest rate). But this type of loan should be reserved for businesses that are already showing a profit (and look to continue expanding) and just need a rather small, temporary bump to take it to the next level. In short, you should use this type of loan as a last resort and repay it post haste.