Getting funded is a dream and goal that is attainable for business owners. Funding is often necessary to improve business cash flow, increase productivity, or for other purposes. Business funding generally falls into two categories; loans and selling company stocks. When seeking funding for your business, your pitch is easily the most significant determinant of the response your potential investors will give. Companies pay heavily to prepare a pitch that presents the company in the best light, convinces investors, and gets the job done. This article explores the different ways to raise money and find investors for your business idea, whether you have started or not, in the UK.
Types Of Business Investors
There are three main types of investors for business owners that are ready to sell a stake in their companies to raise funds. You can find investors with Hello Pareto, quickly reaching several potential investors that fit your profile. Let’s explore some of the different types of investors.
- Seed Funding (Angel Investors): Angel investors are individuals with a significant net worth who provide funding for businesses (seeds) and get a percentage of the company stock. The critical difference between seed funding and other business funding is that angel investors often provide invaluable business resources besides money. Most successful angel investors have an array of business skills that enable them to spot potentially profitable start-ups; they only invest in businesses and individuals they trust and have some confidence in their plans. That’s why pitching and telling a convincing business story is essential to find investors.
- Venture Capital (VC) Firm: A VC firm is a company that invests in other companies to own shares and make profits. VC firms typically invest higher amounts than individual angel investors, and getting their funding may be more challenging. They are a cross between bank loans and angel investor funding; VC firms provide funding, get shares, and provide further help if needed.
- Donations And Digital Crowdfunding: Business owners can also get funded from donations. Grants are often termed informal but must be declared under certain circumstances. Digital technology allows companies also to get funded via digital crowdfunding. Crowdfunding is different from P2P lending in one fundamental way. Crowdfunder’s pool resources to invest in a business and become share owners, but P2P lenders don’t become share owners but rather receive interests. There are different crowdfunding platforms today.
Types Of Business Funding
As mentioned above, all funding comes from loans for repayment (with interest) or investors who buy a stake in the company’s stock and make profits (or losses) depending on the company’s performance. There are two possible formal ways to get loans.
Sources Of Business Loans
- Bank Loans: Getting bank loans for your business is similar to taking a business mortgage, i.e. borrowing against your business asset. Most banks offer small business loans of less than £200,000. Higher amounts require more assets and a stricter process. It is best to declare all assets owned by the business and other existing loans (if any). It would help if you also explained the business process, financial projections, potential purchases with the loan, and loan payment plans. Only accept a loan with an interest rate that you’re comfortable with.
- Peer-to-Peer Funding: P2P lending describes a loan scheme with no broker or intermediary. The usual pattern is for a pool of investors to meet business owners seeking funding on a platform, and then they complete the process. P2P lending is similar to bank loans in all aspects of debt rule. But the only exception is that several investors pool their cash to provide loans and get returns, as opposed to a single bank granting business loans.
How To Find Investors For Your Business
Preparing a great pitch and having excellent presentation skills is essential, but it will be for nothing if you don’t find the right investors. Finding a set of investors that fit your funding goals is necessary to reduce the material costs of pitching to investors, helping you save time and energy for your business. How do you find investors for free?
- Prepare your business plan and pitch. Ensure it covers everything about your business. Get all the answers ready and build confidence in your projects. Investors look for feasible and bankable business plans.
- Check an investors’ database such as Hello Pareto’s.
- Attend events where you can meet potential investors. Seminars, conferences, and formal business events are ideal places.
- Send cold pitches to potential investors. Take extra caution to avoid being spammy.
- Blog about your business and raise awareness about what you do.
- Present your pitch and receive offers to investors if they contact you.
- Complete the process and get the funds. Only agree to terms that work best for you and your business, and remember to have the legal end tied up.
Your new business might be funded in a variety of different ways. Examine each option in this guide to see which will serve you and your business the best.