About Business Investors

Investing Capital

There are many financing options available to start up businesses and already established companies; traditional bank loans are no longer the only option for businesses to obtain necessary capital for growth. Companies should seek investors that suit the type of business they run. Some investors require demonstrated earning potential while others are more tolerant of risk.

Loans

There are many types of loans available for investment into a business. Different companies and investors back these loans. There are micro loans, asset-based loans, bank-term loans, SBA-guaranteed loans, private loan guarantees, royalty financing options and 504 loans. The SBA developed the micro loan program in 1992 and permanently established it in 1997. It is best for start up companies with small capital requirements. Bank term loans are the traditional loans with monthly payments provided through bankers. The SBA (Small Business Administration) or a wealthy individual can back a loan that a company cannot otherwise get.

Venture Capital

Venture capital comes from professionally managed funds to invest in emerging companies. Firms invest between $5 billion to $10 billion annually in companies. It is difficult to obtain this type of funding because these venture capital investors are extremely picky. Venture capitalists demand a significant equity in a business.

Going Public

Going public involves registering with the U.S. Securities and Commissions Exchange. An initial public offering or IFO involves an investment banking firm selling business equity, generally in the form of shares of company stock, on a recognized stock market. Direct public offerings or DPOs are the direct sale of shares to individual investors. Going public provides greater access to potential individual investors.

Angel Investors

Angel investors are individual venture capitalists seeking companies with high growth potential. This type of investor is appropriate for a young company that has not yet established itself. Companies seeking angel investors must be prepared to welcome ownership from outside or relinquishing some amount of control over the business.

Federal Government Venture Capital

Small Business Investment Companies (SBICs) and Specialized Small Business Investment Companies (SSBICs) are licensed through the Small Business Administration. These companies invest their own private capital and also can borrow from the SBA at reasonable rates. They target entrepreneurs who have been unable to own a business due to social or economic disadvantages.

References

• Entrepreneur: How to Raise Money for Your Business
• U.S. Securities and Exchange Commission: Small Business and the SEC