Investment Capital Costs
Investment capital always comes at a very high price as you need to provide a substantial amount of equity to your angel investor. You can ameliorate this cost by owning a business that is already in operation or a business that is considered to be low risk. We will continue to discuss these issues throughout the rest of the article.
Writing a good business plan is one of the most important part of raising capital. When writing your business plan, you should always include a yearly budget as part your financial forecasts. If you are unfamiliar with how to write a business plan then it may be in your best interest to hire a company that can assist you in this process while concurrently showcasing the investment capital cost that will be incurred by your company.
Capital always comes at a cost. There many benefits to working with private equity firms despite the fact that they provide capital at a very high cost. Equity will almost always be required as a negotiating tool. Royalty based financing can it help you get the capital that you need without having to give up too much of your equity. Capital that is obtained through a hard money mortgage is usually extremely expensive although you will not have to give up equity in order to receive this type of investment. Hard money mortgages typically carry a term of one year to two years at most and are usually secured by real estate or tangible equipment.
More and more angel investors are investing in hard money mortgages due to the fact that there is an immediate upfront fee paid to them for providing capital. You should thoroughly showcase the tangible assets that are held by your business that can be liquidated if your business is not as planned. It is very important that you have an extensive amount of industry experience as it relates to the business that you intend to start or expand. In all transactions that are related to raising new capital for your business going to need to have a business plan. The current economic climate has made lending very difficult. Debt capital allows you to own 100% of your business at all times.
Many small business investment companies are not directly looking to take a very large percentage of your business. A breakdown of investment funds should be provided to potential funding sources within your business plan. As an alternative to angel investors or venture capital, a SBIC is able to provide you with both loans and equity as it relates to your business expanding.