Not only should an entrepreneur have knowledge of the industry, they should have strong management skills as well if they are seeking capital from a third party. If you are seeking funding for a business that is currently in operation, it is important to consider your business growth strategy as you are going to need to have a very strong exit strategy and rate of return associated with your business. It is imperative, within your business plan, that you have a very well-developed industry analysis that is included with any documentation that you’re going to provide to potential investor in order to solidify your case for a potential angel investor. As with all financing, you should discuss every option available to you with a certified public accountant or business adviser to make sure that the capital is not coming at an undue cost. By demonstrating the experience of your Management, and that your business will be profitable will go a long way to attracting potential investors or other outside funding sources.
The three crucial components for a successful new business are the opportunity, the entrepreneur, and the resources. Smaller business plans that are designed to provide an overview of your business are typically no more than 10 pages in length. When seeking any type of investor financing, preparedness is key. A solid exit strategy can help to safeguard an entrepreneur form getting locked into a business that is not profitable, and this must be included in any business documents that you offer to an angel investor or venture capital firm. For large deals, you may want to seek a syndicated group of investors. If you are already in operation then you may want to seek a business loan instead as this capital will come at a much lower cost.
The ROI of your business should be more than 20% per year in order to attract investors that will work with you on an ongoing basis. Many authors produce work relating to small businesses as well as angel investment, and you should review all of this documentation before you begin your quest to find capital for your business. It should be noted that a private funding source or private investor will usually want 20% to 80% of the business depending on the risks associated with your venture. It should be noted that over the past five years, specialized financing has been extended to loans that most banks would have previously considered to be too small to be profitable through the Small Business Administration Low Documentation Program. The primary issue that you will need to address as it relates to working with a small business administration lender rather than an angel investor is whether or not you have the credit in order to finance your business.