The idea that the banks aren’t lending has become a powerful social meme ever since the crash of 2008. Ever since then interest rates have remained low, and the banks have been less keen to lend. For small businesses, it is hard to get credit for big expenses or to cover immediate cash flow shortfalls.
What is so strange about the whole situation, however, is that many businesses are viable. In fact, most will probably make a handsome return on any investment they receive.
The problem is that the banks have become sclerotic institutions. They’re unable to recognize an opportunity when they see one. So businesses need to start considering alternative ways to get finance.
Where banks can’t see the benefits of expanding your business, angel investors can. You can take them through, in a step-by-step fashion, what you’re going to do with their money, and how you can make more money with it. Angel investors know that most people that are starting businesses have very little experience, so they may ask for a share in the company. But they also know that some people are just competent from the get-go. And it’s these people that they want to find.
Angel investments can come in handy in situations where you need to make a significant capital expense to see a profit. For instance, you might desperately need offices to expand your businesses, but are struggling to pay the deposit.
Look for Angel investors that know your industry well. You’re more likely to get hold of their money if they can understand what you’re trying to achieve. Start by searching online tools like AngelList. Or ask around your local business network if it would be possible to arrange a meeting between you and an investor.
When you do meet the investor, make sure that you provide a compelling proposition. Don’t just stick to slick presentation and powerpoint slides. Show them a product and demonstrate that you’ve had initial success. In other words, show them the value that you offer that the bank failed to understand.
Crowdfunding is one of the greatest inventions of the 21st century. It solves an age-old problem in economics by reducing group investment transaction costs. There is a huge, untapped demand out there for all sorts of products, from video games to cryptocurrencies. And it’s all become a reality thanks to the crowdfunding platform. Crowdfunding reduces the cost of getting thousands of people together to invest in an idea or product.
As with angel investors, crowdfunders will want to know in-depth information about your business. So expect to spend a lot of time answering questions about your product or service.
But more importantly, you want to stand out from the crowd in marketplaces, like Kickstarter. Because the costs of entry are so low when it comes to crowdfunding, the competition is high. That means that you have to create a compelling value proposition that clearly communicates what you want to achieve. And, more importantly, how the crowdfunders will benefit.