When Does a Startup Become Attractive to Investors?
You’ve finally discovered your passion and put your heart and soul into your business, but there’s just one issue- the dollars aren’t rolling in as expected. You now realize that it’s time to figure out how to attract investors and acquire funding to keep your business growing. But how would you cope if investors like bankers, angel investors, and VCs analyzed your startup?
Investors are aware that about 20% of startups fail in the initial year, 30% in the second year, and 50% in the next five years. It is all these that make them extra cautious when deciding which startups to place their money in. It’s vital to ensure that your company fits the correct box when attracting funds from investors. We’ll show you practical tips to make your small business attractive and receive small business loans from fintech companies like Camino Financial.
A Successful Path All Ambitious Startups Should Follow
For your startup to become investment-worthy, here are some considerations to bear in mind;
Present a Good Business Plan With Clear Goals
As a startup entrepreneur, your business plan is an important document that proves to your investors that your venture is worth their risk. Your plan should spell out your business goals and objectives and show that you have an in-depth understanding of your customers. It should as well accurately describe your products and services. Investors already know much about your industry, so a distinguishing benefit for you should be a sense of expertise in your plan.
Get Customer References
Some investors may want to speak with customers who have direct experience with your product. Investors seek to understand the value that your business brings to clients, and having a conversation with a customer can convince them. It would help if you always had customers ready to accept interviews with investors when needed.
You Should Present Audited Financial Statements for the Previous Months Or Years
Having a quality accounting firm validate your processes and numbers boosts the reputation of your business before investors. Whether you are seeking small business loans or funds from an investor, you should present proof of stability and responsibility. It will save time, cost and increase available leverage.
Difference Between Investors and Lenders
Though the terms’ Investor’ and ‘Lenders’ are often used interchangeably, they have significant differences in their meanings.
An investor or group of investors put money into a business, asset, or property with an expectation that its value will increase subsequently. An investment generates specific equity shares of a property or company and gives the investor great capacity to manage some shares and influence business decisions.
- As a business owner, you don’t have to pay monthly rates or interests.
- You might not necessarily need to repay the money should the business fail.
- You have access to business advice and mentorship.
- You have to give up shares in your business.
- Investors get to have a say in your company.
Lenders, in contrast, range from banks to private individuals or agencies who give out loans on the basis that they’ll get back the principal of the money lent. The interest rate they are liable to receive makes it financially worthwhile for the lending institutions.
- As a business owner, you retain sole decision-making rights for your business.
- You get to build your credit.
- It requires monthly repayments.
- You may have to put down collateral.
How Funding Increases a Startup’s Potential
Funding gotten from small business loans and investments increases a Startup’s potential in the following ways;
- It helps to build your enterprise idea on a sound base or foundation.
- Your business gets to attract the attention of a vast market in little time.
- Funding enables your company to go for the best in terms of social capital, technology, etc.
When reaching out to inventors, you must put your best out there. Investors tend to be cautious, but with the proper implementation of these strategies, you’ll have access to funds and small business loans in no time. For easy access, you may consider a fintech lender with a track record of helping startups grow.