Small businesses start with entrepreneurs who see a great opportunity to create wealth for themselves and others. The idea may surface from one of those “eureka” moments where a unique solution that responds to a market need lights up in their brains. However, in many cases, they may have insufficient funding to carry their ideas through to reality. This is the time to build what is referred to as an investment deck, which will serve as a guideline for the business and a platform from which funding can be solicited from private individuals and lending institutions.
A deck consists of a detailed business plan, which clearly states the goals and objectives of the business; defines the digital and direct marketing strategy, website design, keyword selection, SEO and SMO objectives; analyzes the competitive landscape; and defines the uniqueness, benefits, and features of the new business. Once the investment deck is ready, use the information to set specific goals and objectives for your company, and to solicit funding.
Friends and relatives may be a good starting point. Minimize the risks to any single investor/lender by soliciting money from many individuals in this group. Make sure that they are investing discretionary money that they can afford to lose if things go sour. No business is foolproof and the best-laid plans can be upset by shifts in the marketplace that are not foreseen at the outset. Be upfront with them on possible risks.
Banks and suppliers can be a viable source for start-up capital if you, as an owner, have a good personal credit record. A clean and high credit score will facilitate obtaining funding to finance company purchases and secure a line of credit from a bank for working capital. This may, at first, require personal guarantees. As revenues build up, however, the company’s assets can be used as collateral. In emerging markets, the banking industry has been revolutionized by fintech and microlenders that operate through mobile networks and facilitate lending to small and micro businesses. Avoid accepting loans at unacceptably high-interest rates because this causes a destructive cycle of dependency.
Crowdsourcing platforms, of which Indiegogo is one of the most prominent players, have helped raise over a billion dollars in funding for small business start-ups. To launch a crowdfunding campaign requires some preparation and initial funds but they are very reasonable and can be organized on a shoestring budget. The advantage of this form of funding is that you can reach a broad audience around the world.
Angel investors are individuals who have set a personal mission for themselves to aid and incubate new business ideas and concepts. They have a more sophisticated approach in choosing where and how they place their money on risky ventures, but they are definitely open to new ideas. Angel investors are usually involved in local business associations, and this is a good place to search.
Immigrant investors are offered a fast track to citizenship if they can invest in new businesses. In most cases, it is necessary to show that the new venture will provide additional jobs in the country where the investment is made. The commerce and industry development department in most countries would be a good place to look for these types of investors.