Raising business funds – its all about risk

Raising business funds – its all about risk

raising moneyIn order to raise money for a business, an entrepreneur needs to realise just one thing – its all about risk/reward!.

For instance, a bank will lend money in a low risk way because thats what they do – lend secured money that they can recover should the business fail.  Don’t expect a banker to take on high risk, its not their business.

The other end of the scale are the equity investors (Venture Capitalists, Private Equity etc). Their rate os return is designed for the risk that they assume, and they are well prepared to do that.

However, both ends of the scale have one thing in common, they like to see the story of the earnings stream and that they can make money from the company.

There’s an easy way to do this

  1. Create the compelling story of the company
  2. Support that story with good hard facts – essential
  3. Present the story in a way that provides the return on investment for your investor (by the way, a bank IS an investor)

Raising money starts way before an entrepreneur actually approaches the an investor for the money.  A rigorous plan for a business should be in place whether a business is going to raise money or not and that plan acts as the invitation to invest document.

Too many companies approach investors without getting their story right and understanding the psychology of the lender (I see it all the time).  The worst offence – pie in the sky requests without facts to back them up.

Do yourself a favour, know your numbers, produce a plan and work to that plan.  Money will then be easy to raise if the story is compelling enough.