Business Information for Entrepreneurs by an Entrepreneur

If you want to start your own business, but are unable to procure a bank loan because you do not have any collateral or guarantor, or for any other reason, then you could approach a venture capitalist.

Venture capitalists will invest in your business if they see future potential in your small business and will take a share of your profit margin.

Develop a Professional Business Plan

Venture capitalists will not invest money if you just stand in front of them and narrate your plan. You will have to provide them with business facts and figures. You will have to give them a detailed plan as to your product details, how you plan to attract customers, your projected sales and projected margins. Your targets should be physically achievable and should not simply be written from your imagination.

You can write your business plan with help from software packages available on the Internet. Or better still - get it done by a professional.

Conduct Thorough Market Research

As a small business owner, you have to know who your customers are and where they will come from. If you fail to do the proper market research, your business plan will only end up in the trash. Simply assuming that there is a market for your products can be a costly error in judgment on your part — you need cold, hard facts.

Give the results in writing to your proposed financers.

Present and Follow Up

Prepare 7 to 10 copies and submit them to different venture capitalists. Call them up and ask them if they have any questions regarding your report. Show them that you are serious about your proposed business. Then wait for their response.

Be aware that venture capitalists can take over your business if they have a major share of it. But if you are successful in running your business and you have a good venture capitalist backing you up, then not only will you obtain the financing you need, but your business will be a success, making your investors very happy.

If you are interested in buying an already-established business, there are a number of ways that you can arrange for financing to keep your new business running smoothly.

Pay Cash

You can pay the entire amount upfront and purchase the business. However, this method will work only if you have the cash available.

Bank Loans

You can apply for a bank loan. You will normally be required to submit the previous 3 years' financial statements and perhaps some sort of collateral. You could contact the SBA (i.e. Small Business Administration), which is appointed by the Federal Government, to help you in securing a loan. The SBA would stand as guarantors for your loan.

However, getting a bank loan can be difficult without the proper documentation and collateral or guarantors.

Friends & Family

You could approach your friends and family for a loan. The interest rate will be reasonable and you would also not need any collateral or guarantor. However, paying off that loan is very important - if you want to continue to have good relationships with them.

Venture Capital

Venture Capitalists are people who will invest in your business if they see a potential for earning money out of it. However, they could take control of your small business if they become major shareholders.

Choosing a good venture capitalist is important - or you could end up with a ‘Vulture Capitalist', who will only try to take advantage of the fact that you are a new business owner.

Angel Investors

These are wealthy businesspeople or other individuals who have money and are willing to finance your business. They are similar to venture capitalists, but they usually give you a lower rate of interest and give you financing for a longer period of time.

Whichever way you get your business financed, ensure that your documentation is complete and you fully understand the terms and conditions of any papers that you are required to sign.

Well, maybe a little (or maybe a lot if your small business is in mortgage or real estate).  And if you run a large company and have many people on your payroll, then domestic and international economics do come in to play.  But if you are starting a company, the looming recession, the poor market performance in the U.S. and other countries, and other economic indicators that suggest a downturn will likely not affect you.

Here is why:

• Start ups are often founded by resourceful people ready and willing to take risks.
• The economy doesn't stop. It just grows more slowly.  People still need to buy things.
• Entrepreneurs usually target these buyers through niche products and services.