Who can be an investor for your business

One of the most stressful challenges you may face as a new business owner is trying to find someone to invest in your business. Because there are very few small businesses that can get up and running with their own funding finding investors who can help your business becomes crucial. Small business owners who choose to have investors or equity financing usually do so to avoid having to take on debt.This way if the business fails (as many do) they are not left owing the bank considerable sums of money since most investors take on the risk when they put money into your company. While there are several avenues that you can take in order to find investors it is important to understand that each of the investor options has its pros and cons.Understanding the needs of each type of investor is crucial to finding the right person to fund your business. Here is what you need to know about whom to find investors for your business-

• Angel investors-These are individuals of considerable wealth who invest in companies that they tend to have a personal interest in.It is important to understand that there is a range of angel investors.Some angels are certified and some are not (just individuals with lots of money).Some angel investors will want to be closely associated with your business and may even want to be involved in the daily running while others will simply give you the money and expect a timely return. You can check with your bank, local Chamber of Commerce or accountant for recommendations for angel investors who may consider investing in your business.It is also important to understand that angel investing is typically hard to come by so your business plan should not be based on it.
• Venture Capitalists Firms-These are companies that as their main focus invest in smaller, startup companies.Generally these firms are specialized.For example there may be a firm that specializes strictly in your type of business but not the business next door to yours.It is critical to find the right type of Venture Capitalist firm and to make sure that it is both reputable and stable.Like angel investors some venture capitalist require heavy control in your business while may not want as much control. Searching online and checking with your bank may give you information on where you can find a venture capitalist firm that would consider investing in your business.
• Friends and family-You can ask your friends and family if they would consider investing in your business. However it is crucial that you make clear the determination that this is an investment opportunity and not a loan.Family and friends should understand that because this is not a loan any money they put in your business is at risk should it fail.Often well-meaning small business owners and their family and friends do not make this distinction which leaves the business owner in a difficult position should his or her business fail and friends and family are expecting their money to be repaid. Small business owners should think carefully about the potential damage to relationships before approaching family and friends for investment money.

It can be tempting to take the first offer of investment you run across (because who does not want the money to get their business up and running) but financial experts caution against simply accepting the first investment offer you receive.It very important to make sure that you and your potential investor are a good fit since they will most likely be involved to some degree in your business.Investing is simply more then turning over money and making sure you have found the right investors is crucial to the long-term success of your business.