Stanton Financing Guide

Raising capital to start a new business may seem like a daunting task, but it need not be overwhelming if you follow a few basic business practices. If you have a viable idea that will net a return for your investors and prepare a compelling business plan the chances are good that you can find investors to join you.

Your first task is to create a business plan, sometimes known as a “business proposal” or “prospectus.” Your business plan needs to be very detailed and concise. You should include information about your educational background, experience and training in the area of business you are contemplating. Just like a resume for a job, include references and any other favorable personal qualities that you feel reinforce the reasons why an investor should trust in your ideas.

It can’t hurt to include any information you feel comfortable sharing with regard to your positive credit history. If you have records of various satisfied loans along with the payment history, that information could be helpful to prove your stability with regard to financial obligations.

If you are requesting financing for an existing business the rules are a bit different than a new business startup. The current owner should be able to provide you with profit and loss statements. If you are purchasing an online business, statistical information pertaining to traffic, number of units sold and paid advertising are definitely necessary. The purchase price of the business needs to be included along with detailed information about how you intend to service the debt as well as how the potential investor will benefit from your request.

If you are seeking investors for a new business, the information required increases. In addition to the information outlined above, you will need to include market research, projected costs and a detailed summary of how you intend to generate income. This information needs to be projected for a period of three to five years. It’s a good idea to project your expenses on the high side.

Have some idea of what you expect to pay your investor. The only reason someone is going to lend you money is if they can see decent profits in exchange for lending it to you. Your market research had best substantiate that your plan is viable and will provide them with sufficient return on investment to justify their involvement.

Before you begin your search for investors, it’s a good idea to have an attorney and/or accountant take a look at your plan. A good professional may suggest specific points that you may have overlooked.

Once your paperwork is in order, it’s time to start looking for investors. One place to begin your search might be friends or family. You might approach them singularly or in a group. Whatever method, you need to have a complete copy of your proposal carefully outlining your research and what they can expect in return for their assistance.

Read the classified pages of your local newspaper. Venture capitalists often advertise this way. Their rates are usually pretty high because they have a tendency to take on “risky” investments. A twist on this method might be to run your own ad either locally or nationally. If you select this method, explain the particulars and emphasize how much they can expect to receive for the load of their funds.

Use local business directories to find companies that specialize in “investment services.” You can approach a local bank, but try and find a bank that specializes in industrial or business type loans.

You might consider incorporating and selling stock in the company.

Another option might be a “money broker.” This can be risky. There are some legitimate brokers and others who operate on the shady side.

Be creative. If you believe in your idea, don’t be afraid to do what ever it takes to launch. There are plenty of ways to come up with the capital you need. Think outside the box. Whether you are looking for $300 or $300,000 the money is there you just need to dig for it.

Brad Eden is a Entrepreneurial Sciences expert with 14 years of industry experience in real estate, marketing and technical communication. Brad owns & operates a free traffic resource for entrepreneurs. http://www.americanfreetraffic.com/home.html

You have always been interested in investing in a business, however you always hold back because you are scared of making a bad choice and losing your investment. However, there are some ways to evaluate businesses to reduce the risk you are taking when you invest. Of course, risk is never eliminated, but when you properly evaluate what makes a business worth investing in then you will more than likely have your answer whether the company will be a success or failure before you invest your dollars. The following tips will help you make the right investment.

Investment Tip #1 Management

When deciding whether a business is worth investing in or not you need to evaluate the management because a business really is only as successful as its management. Because of this you want to evaluate if the management is knowledgeable, rational, and able to make the right choices to make the company money and prevent it from losing money. Of course, this is an easy question although the answer is a little more difficult.

Investment Tip #2 Business Plan

A business plan that is well laid out and shows positives, negatives, and how the company and management will handle problems within the business is very important. A good business plan shows that management knows where the company is, where it wants to go, and what it needs to do to get there. Be sure you take a look at a company’s business plan before you invest.

Investment Tip #3 Return on Investment

The ROE, or return on investment, is also crucial when you are considering making an investment in a company. Of course, the ratio of equity to debt can be confusing, but if you evaluate the ROE and other economic factors you should be able to tell if the company is bringing money in or losing it.

Investment Tip #4 Room for Growth

Making sure the business has room for growth in its market is also important. A company that has little competition is preferable, but a company with a moderate amount of competition and a plan to be number one is ok as well. Just do your research.

When you are interested in investing in a company you need to take your time and evaluate the company, look over financial statements, talk to management and have all of your questions answered to your satisfaction. After all, it is your money and you aren’t going to give your money to just any company. So, be sure and confident in the company and have that backed up with proof and you will decrease your risk investing in a company.

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