Small Business Investors
As a small business owner, you don’t have to depend just on debt financing, such as bank loans, for your small business firm.
Business investors are organizations or a group of people who give capital to start a business and in exchange for this, they gain some control of the business and formulate agreements. The business investors make sure that the agreements ensure a good return on investment in exchange for their money. In addition to the money the business investors also provide experience which could be an important factor in deciding the success of the business. The financial prosperity, political solidity and business-friendly environment make United Kingdom an ideal choice for business investors from all over the world. London is an important financial centre and an attractive potential market for global business. For business investors, it is an entry to European Union.
Growth of Business Investors in UK
One of the main attractions for the business investors in UK is the high GDP growth rates. The tax environment in this country is very competitive and the corporate tax rates are among the lowest in the European Union. The government has a business friendly attitude with the businesses and strives to decrease the burden of supervision on businesses even further. The labour environment, skills and the high quality staff and skills are conducive factors that make it very attractive option for business investors to start up new businesses. Business investor contacts usually have a very wide range of interests so there are no favourites on any one sector.
Terms of Payment
The fees of the business investors are usually directly proportional to the success of the business. There is a percentage in cash and option fees based on the amount of funding that is being in introduced. The business investors also charge a project management fee that includes the expenses and work required to prepare, authorise and market the proposition.
Advantages of Business Investors
- The business investors are on the lookout for openings to make money, and so this is a venture in which both the sides stand to gain substantially.
- Business investors bring in not only capital but also additional expertise as well as funding.
- Newly set up companies do not have to make payments to investors until the business can afford them.
- Borrowing from the bank becomes easier since it increases the capital invested in the business.
Disadvantages of Business Investors
- There will be a lower share in the profits of the business.
- Investors tend to take the control of the company and anage the business in their own ways.
- Business Investors may desire to structure the business in a manner that makes it easier to sell their shares in the future.
- Start-up businesses tend to become impatient and interfering.
- Control is an issue that usually come up after some time. Knowledgeable investors may shy away from a small position in a smaller organization. If they think that the chances of liquidating their investment will be very tough if the company does not do well.
How does a business investor help in the businesses:
- The business investor provides start up funds that are needed to procure equipment and hire employees.
- The business investors educate the new companies about business and all its related aspects.
- The start-up companies get a list of all the business contacts and referrals that have been collected over the years.
- The level of commitment of the business investors is supreme. All efforst are taken to create a sustainable, profitable venture.
How to Find Business Investors
There are several companies in UK that can help entrepreneurs find the appropriate business investors. These companies have a database of investors making it very easy to raise business funding for the project. Contacts with these companies can help find investors not only within the country but also associate with foreign investors that are looking for UK entrepreneurs to invest in. There are many sites on the Internet that offer regional grants to small businesses.
Factors to Consider before choosing the business investor
It is evident that growing businesses need finance along with a lot of help if they are to achieve their full potential. All this investment is is needed without too many hassles with complete discretion and at a reasonable cost. Business Investors provide all these facilities and easily fit the bill of the start up companies. With the business investors there is no need to run to the banking institutions and try to obtain personal loans against a personal guarantee. This saves the new starting up companies a lot of headache and trouble. Though the business investor has money to invest; but most of these investors have severe requirements that the new business may not be able to meet.
Some business investors prefer to be silent and play no active role part in the running of the business; others insist on having a say in the management of the company. Some business investors are professionally managed companies that dedicate themselves to finding start-up companies with a potential that they can arrange to a future public stock offering. These investors have a tendency to be selective and reject most inquires. It is advisable to look at the classified ads of investors seeking opportunities.
Investor expectations can sometimes adversely affect the future relationship with the companies. These investors have chosen to leave the safety of banks and the relative safety of the stock markets and instead opted for the higher risky venture in the hope of expecting high rates of return and capital gains. Hence if their aspirations are not fulfilled they can become dissatisfied and demand to cash out. The start up companies will not be able to do so because the money is most likely, invested in equipment, inventory, customer credit, or others' assets and would not be available immediately. Hence to ensure the smooth working of this relationship, both the parties should realize that this is a long term commitment and not a short term affair.
In some cases the business investor might ask the start up company to give up control. In such case the start up company should take legal advice to safeguard its rights. Trading a bulk portion of the equity for money is a tricky option. If the company is successful, it may later feel that it sold itself too cheap. On the other hand, if the business flounders, they may get may pushed out. Hence it is important to remember to give up control only when there is no other choice. Therefore it is important to consider all the pros and cons of the business investor concept and then go on from there.
Finding A Business Investor
Almost all businesses need capital at some or the other stage of development of business. And there would be practically no business owner who do not consider of business investors as an ideal source of the capital that is required. But finding a business investor is not an easy task.
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