There are lots of individual investors who are keen to invest in good business. The investment can be in the form of Loan or Equity depending upon the requirements of business & its credentials.
These investors are more inclined to future prospectus & willing to invest on any project irrespective of past credit history or CIBIL score. Their intent is on assessing the visibility of business & execution capabilities of prospective borrower.
These investors are investing in unorganized way so they invest only on the high ROI proposals and these kind of funds are useful where compelling opportunity demands the fund raising but other sources are stuck due to any reason. We can term these finance as bridge finance also to fulfill the funding needs at the time when other sources are considering proposal for investment.
Benefits of Fund Raising from Investors
- Individual Investors have their appetite to take call on risky proposals.
- Investors are less process oriented so their decisions are direct & instant after meeting with business owners.
- Investors generally invest in such proposals which are somewhat linked to their existing business setup so promoters & owners get time to time expert advise on their business.
Type of Investors
Investors can be classified into three categories:
Private Investor or Individual Investors:
These investors are keen to invest into projects of their existing domain of expertise. They are less process oriented & hard to convince on the investments. This is a scattered segment & look for high ROI on their investments.
Angel investor are a refined segment of individual investors & they are more focused on creating value addition through their investments. There are many examples in today’s scenario there are many big names which got their business established only after they took help from Angel Investors. The most prominent names are Yahoo, Google & many more such business houses which got to reach at their current level of recognition only after investments from Angel investors.
They are professionally managed private investors, they invest in companies which has huge potential. They usually prefer to invest in Equity.
FAQ on Funds from Investors
What is the cost of funds raised from investors ?
The cost of funds depends on the quantum of funds & type of funds. If investors are ready to buy stake in the business then their right of profit will be according to the profits into the business. However when they lend the funds then the cost of funds is as per mutually agreed terms between the lender & borrower which generally decided on spot in their meeting itself.
How soon funds can be raised from investors ?
In case of debt funds the maturity is bit early compared to equity option. In debt / loan, the lender used to see the prospectus of business and possibilities of risk aversion in case things are not shaped as per initial assessment at the time of lending. A well defined project needs and repayment of funds is easy for decision by prospective lenders / investors.
What do we do to raise funds as equity from investors?
It all depends on the right kind of investors for the business who are inclined to invest in the offered business. Generally investors are in contact at various networking platform including social media.
To raise funds for a business requires proper presentation of business credentials & future prospectus to create interest in the prospective project. Investors are more inclined to invest in a project where the expected ROI is better than average so if compelling opportunities are available then investors can come forward instantly to buy stake in the project.