Best Practices

Six Type Of Investors When Raising Capital For Your Startup

It is critical for budding entrepreneurs to take the time to learn investors

Investors can partner with a startup at almost any stage in its life; they are unique partners in the growth process of a startup. The level and quality of their involvement can play a part in a company’s success or failure. It is critical for budding entrepreneurs to take the time to learn about the type of investors that are available and how to use best practices when approaching them for funding.

Below are six of the most common types of investors, as well as recommendations for when they should be considered.

 

Six Type of Investors

Friends and Family
Business owners can rely on family, friends or close acquaintances to invest in their companies, especially in the beginning. However, make sure you speak with your legal team as there are legal limitations to how many of these individuals can invest in startups. While it may be easy to convince loved ones to help, thorough documentation is highly recommended.

Banks
Banks are a classic source for business loans. Before your loan application is approved, you will usually be required to review your revenue stream or produce proof of collateral. Because of this, banks are often a better option for more established businesses. The downside to this is that majority of you reading this are in the cannabis industry, and many are still having trouble finding a bank to work with for your day to day needs, so to get a bank loan for a cannabis business doesn’t seem feasible at this time.

Peer-To-Peer Lenders
Peer to peer (P2P) lending is a way to borrow without using a traditional bank or credit union. P2P lenders are individuals or groups that offer capital to small business owners. P2P loans aren’t always better than loans from a bank or credit union, but they have some unique features that make them competitive, such as low costs, quick and easy, credit matters but blemishes are okay.

 

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