The idea of starting your very own business can be exciting, but the cost of getting it started can prevent you from being able to follow your dream. Too many new businesses fail and therefore traditional lenders are very careful who they give money to. Even if you approach them with a quality business plan, expertise in the necessary areas of operating it, and a commitment to make the business work they could turn you away.
As a result of these types of frustrations many people turn to private venture capital in order to start their own business. For a small business you may not need a large amount of money to get it off the ground. A private venture capital investor may decide you definitely have what it takes to offer a successful business and they will work out a deal with you.
With their investment, however, it is different than just a loan that you would get from the bank. You will need to repay the loan amount with interest. The investor also will own shares in your business and they will receive a portion of your profits. In most instances this amount is approximately 2% of your profits.
You will need to crunch numbers and see if you really feel that you will be able to make a good profit from your business even after giving the investor their percentage. Once you have paid off the loan in full to them you won’t have to pay it any longer. Keep in mind that it can take several years for a new business to have enough profits to pay extra on their loans.
Before you proceed with a private venture capital investment you need to make sure you are dedicated to owning your own small business. It isn’t as glamorous as some people think it is. You get to be your own boss but you also get to deal with all of the headaches that come along with it. You will have to work hard and work smart in order to be successful. If your only reason for opening the small business is to make money then you won’t enjoy it.
Private venture capital isn’t right for every type of business so you need to carefully evaluate what your needs are and what they can offer you. Take your time to find a reputable private venture capital investor. Some of them prey on innocent people that want to desperately own a business. Others are looking for quality business ideas that they can invest in. They offer a chance for you to be successful and they also make a profit at the same time.
You should be able to schedule a free consultation with a private venture capital investor to discuss the issues. You want to be able to communicate your goals as well as your financial needs to them. A good private investor will work to match your needs with something they can offer. If you feel like you are being taken advantage of in the deal you will want to walk away from it.