Most working people struggle to make the right choices when it comes to investing their hard-earned cash in a commercial venture, and this is especially true if you are not involved with the business community in your local area. First-time investors often find out about new opportunities through personal contacts. If a friend or family member is considering a new business, that’s when you could find yourself with a request for financial assistance.
As with any investment opportunity, before lending your money, you need to stop and consider whether their idea seems viable and could be a success. If so, ask why they cannot borrow from the bank. It could be that the bank is simply being overcautious, or they may have genuine concerns about the planned business.
If you do decide to invest in a business, never agree the deal on a handshake. The contract should be drawn up by a legal professional that can ensure that your liabilities are made clear, along with the extent of your investment, and how any profits will be divided when the money starts to roll in. You may have a long wait for a return on your investment, but if the business does well and you’ve factored a certain amount of interest into the agreement, you could be looking at a regular income for many years to come.
Helping out a startup company is often referred to as angel investing because often the terms of the loan are far more favorable than those offered by a bank. Once a business is established and has proven its ability to turn a profit, venture capital is the next stage of investment. This cash injection enables a business to grow and build upon its existing success. After this, mezzanine financing can sometimes be offered as a quick fix solution to a cash flow crisis. Lastly, private equity is the domain of serious investors and is a multi-billion dollar industry. This is only an option if the company is extremely profitable and well established.
If you’ve decided to invest in business but you’re not sure where to begin, Pete Briger can help. His New York-based company, Fortress Investment Group, is a global leader in investment management, with over 1,600 private and institutional clients. As of 2014, they had $66 billion of assets and an impressive trophy shelf, including Institutional Investor’s “Hedge Fund Manager of the Year” and HFMWeek’s award for “Management Firm of the Year.”