The Many Uses of Private Money as Business Capital
February 19, 2010 by michael
Filed under Capital Sources, Raising Private Money, Real Estate Funding
A natural inclination among business owners is to think (pessimistically) that capital sources somehow do not or will not apply to their situation. Maybe this point of view is because you were refused financing of some kind. Maybe it’s because you sought venture capital and your business plan was not selected for funding. Maybe still it is because you’ve heard (through the grapevine or just the mainstream media) that business funding is tough to get and are just worried that this trend will leave you “out in the cold”.
It is true that getting business funding is tougher than it used to be. What is also true is that this trend tends to apply to traditional funding sources, such as commercial lenders, community banks, and even loans from government institutions like SBA. What else is there? Well, there’s formal venture capital, which by definition comes from an organized source that reviews numerous funding applications each year. There’s also private money, which is similar to venture capital, but typically comes from a single person and also has much fewer drawbacks.
Venture capital is typically reserved for tech companies and/or medical related products (i.e. businesses that have proven “home run” caliber potential). Unproven businesses, especially those that target investments, have little to no shot with “regular” venture capital, making private money even more attractive for these kinds of businesses.
Within any business, private business capital can be used for any of the following types of capital needs:
- Marketing expenses
- Business start up costs
- Product development costs
- Website design and development
- Product manufacturing and packaging
- Funding entry costs for investments
As you might notice, these types of costs are as critical as they are basic. You may, at this point, have a great idea for a business, and now need to do some or all of the items listed to help get your idea off the ground. How will you do this, if business capital is lacking or limited? Private money may be the answer. Does your idea have potential to become a profitable business? Does your business idea fall outside the scope of most venture capital firms? Is the idea something for which you can clearly and energetically show the value of to others? Answering ‘Yes’ to any or all of these questions is a sure sign that private money may be the answer to the capital needs of your own small business.
Just remember that the private sector has millions upon millions of dolalrs to invest. Recognize that you need privaet money for your small business, and then go get it! If that last part is still what has you curious about how best to proceed, then you’re in the right place. Stay tuned!
