How to Find Investors for a Small Business

Whether you’re expanding your small business or are looking into creating a start-up, you may need investors to help fund your endeavor. Though a small business loan is a good starting point, seeking investors allows you more access to funds which you generally don’t have to repay on a set schedule. However, it’s not like investors will give you funding without expecting anything in return, and you may need to relinquish some control of your business in order to work with certain investors.

Steps

1
Write a business plan that you can share with your potential investors before you begin looking for them.
Investors need to see that you’ve carefully thought about your business and that you have realistic goals, as well as financial stability. Your business plan should present your business in detail, including a full description of your company and how it fits into the market now and in the future.
Additionally, you need to present your finances within the business plan, including how much money you need and how you plan to repay it.

2
Decide on the type of investor you want to find.
For example, you may want to find an investor who will loan your small business money for a specific purpose, such as purchasing new equipment.
You may prefer an equity investor who puts money into your business in exchange for part ownership and a share of the profits if you make money.
While these are two common investment structures, you may also find investors willing to invest in other ways. Tailor your discussion of repayment in the business plan to reflect the type of investor you’re seeking.

3
Network with others in your field to locate investors who may be interested in your business. Though small business owners you know are a good place to begin, contacting professional and trade associations for your particular sector will lead to a greater chance of locating interested investors.

4
Check out funding Web sites where angel investors can find you. These sites are a relatively new phenomenon and their structure varies. However, the best ones allow businesses to post funding requests and allow investors to contact those requests that match their investment goals.

5
Call or visit a university with a strong entrepreneurial program, which generally will have connections to investors. Talk to faculty or staff within the department about the resources they can offer you.

6
Explore venture capital firms. If you have demonstrated success in business and have an idea for either a new business or a change to an existing one that is likely to generate large returns, this can be a good option.
Many of these firms are looking for investments that can create a 3 to 10 percent return in under 10 years. Often, they are more interested in small businesses that can blossom into IPOs or that may be attractive buyouts for larger companies.