Selling Your Small Business to Investors

Published Friday, June 24, 2011 2:25 PM

Attracting investment dollars in a faltering economy requires creativity. Witness the efforts of the financially-strapped California state treasury,  now soliciting funds from an unusual type of bond investor: mom and pop.

When one of the largest states in the nation looks to borrow money from just-us-folks, what's a start-up venture in search of cash to do?

Bootstrapping: When every penny counts, it pays to be frugal, and self-funded. Get customers to pay upfront and get as much free advice and bartered services as you can. For more, read 7 Easy Steps to Bootstrapping Success.

Friends and Family: Look close to home for investors but be sure to treat any loans from friends and family professionally. Put all terms in writing, including how much control the lender will have and when and how the loan will be paid back. Establishing expectations can help keep relations running smoothly. Remember also that mixing family and money can sometimes backfire; potential pitfalls are outlined in Help From Family Has Its Costs.

Debt Financing: Many start-ups rely on debt financing either though credit cards or personal asset loans. Both are viable options, both have potential pitfalls.  Read How to Use a Personal Asset Loan for Your Business and Read Carefully Before You Sign on the Line  for advice on avoiding financial minefields.

Angel Investors: The name says it all. When an investor swoops in with needed seed money or capital, it can feel like divine intervention. Studies estimate that angel investors provide 90 percent of all seed and start-up capital, compared to the venture capital community, which invests less than 2 percent in start-ups. Where to find an angel? Read How to Meet Angel Investors. 

Have you successfully attracted investors for a start-up? Share your thoughts here and at the Pendaflex Facebook page.



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