Starting a new business often requires significant capital, and securing a loan from the bank is always a good option. However, sometimes you may lack the assets for security or simply want to minimise your personal risk. In such cases, looking for alternative sources of investment can be a smart move. Here are ten potential investors you might consider for your business venture:
1. Yourself
Investing your own money into your business demonstrates your commitment and belief in its potential. The more you invest personally, the more confidence other investors will have in your venture.
2. Your Mortgage Lender
Increasing the mortgage on your family home is a traditional and often inexpensive way to raise business capital. It provides a substantial amount of money at a relatively low-interest rate.
3. Parents
Approach your parents with honesty. As potential beneficiaries of their will, you are essentially asking for an advance. Be mindful of any tax benefits but ensure that the request does not ruin family relationships.
4. Siblings
Older siblings who have found success in their lives might be willing to invest in your business. Unlike parents, siblings will likely expect a healthy return on their investment, so be prepared to offer favourable terms.
5. Your Boss
If you are currently employed, consider negotiating a voluntary redundancy package. Alternatively, ask if your employer would be willing to lend you the money for your business.
6. Your Partner
Discuss the possibility with your partner. Their support can be invaluable, and they might also have family members who are interested in investing.
7. Friends
Friends who believe in your abilities may be willing to invest in your business. Multiple friends can pool their resources, and they might accept variable repayment terms linked to your business's performance.
8. A Man in the Pub
Never underestimate casual acquaintances. The person you regularly chat with at the pub might have the means and willingness to invest in your business.
9. Suppliers
Suppliers who stand to benefit from your success may not provide cash, but they might offer equipment loans or agree to deferred payment terms for goods.
10. Customers
Early customers who believe in your product or service might be willing to invest. They can take their return as discounted products or services, creating a loyal customer base from the start.
Insight from Dr. Hermann Hauser
Dr. Hermann Hauser, founder of Acorn Computers and now a venture capitalist, suggests that those looking for additional funding should first approach 'family and fools'. Family members have faith in you, while 'fools' are those with money but perhaps less common sense. It's up to you to decide how far down the 'fools' route you want to go.
Case Study: Tony’s Creative Financing Solution
Tony, a graphic designer, needed £5,000 for computer equipment to start his solo venture. Being cautious and reluctant to borrow money, he sought advice from Mark, whose printing company worked with Tony’s employer. After a confidential discussion, Mark agreed to buy the necessary equipment for Tony. In return, Tony would direct his print design jobs to Mark’s company, considering the equipment cost as a 2% commission on the print jobs.
Tony’s first major contract with a large animal charity helped him fulfill his obligation within two years. Tony owned the computers and continued directing work to Mark, who then used the 2% commission to fund future equipment upgrades for Tony's business.
Starting and building a business is challenging, but exploring these diverse funding options can provide the financial support you need while minimizing personal risk. By leveraging your network and thinking creatively, you can find the resources to turn your business idea into a successful venture.
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