4 Tips For Securing Private Equity Capital For Your Business Idea

Whether you are launching a new business or adding a new product line to your existing company, finding the capital to do so can be a challenge. Instead of the traditional route of bank loans, consider looking for investors that are willing to provide some private equity capital for your new venture. The following tips can help you find the funding you need from a private source.

Tip #1: Start Close to Home

The best sources for private equity capital is from people that already know and trust you. Approach family, friends, and business acquaintances with your plan and needs. Even if they don't have the funds to lend, they may be able to put you in touch with someone in their network who does. Investors are more likely to take a chance on you if you come with a recommendation from someone you both know well.

Tip #2: Know the Investment Criteria

Every private investor has their own set of criteria for providing private equity capital to a new business. These criteria tend to fall into the following core groups:

  • The experience and past relative success of the people involved in the venture.

  • A survey of possible or historical profits in the venture.

  • The development and size of the potential market.

  • The amount and liquidity of the investment.

  • A general risk versus return profile.

Knowing where a possible investor stands on each of these criteria can help you tailor your proposal so that it appeals to them.

Tip #3: Plan for the Future

Financing is an ongoing process, which any smart investor knows. Don't try to create a financial or business plan that is dependent on a single investor or funding source, and don't try to build a successful business on a single round of financing. You need to have a professional and realistic business plan that shows short-term and long-term growth plans along with future plans for securing funding and what those funding needs are projected to be. A savvy investor will become distrustful if you try to pitch your idea as though it only needs their backing--they know it takes the investments of many to lead to success.

Tip #4: Educate Yourself

You may have a great idea and a great plan, but make sure you are well versed on the business and client demographic you will be selling to, especially if you are branching out into a new field. You also need to work through as many what-if scenarios as possible so you can calmly and easily answer an investors questions and relieve their concerns. Understanding your own proposal inside and out can help you structure it so that the investor perceives that you are taking on more risk than they are, which will make them more likely to provide the private equity that you need.

For private equity financing, contact a company such as RLS Associates.