Venture Capital Money For Investment

Venture capital can be a great source of money for investments if you know where to look and what to do. Venture capital can be tricky and there are a few things you need to know.

What Is Venture Capital?

Venture Capital finance is a method used to raise money aside from borrowing from a bank. If you have a new business, or an existing one that needs to raise money then venture capital may be something to look in to. Basically instead of securing financing through a traditional bank, a venture capital firm will loan you the money expecting to receive a return on it for themselves.

What Do I Need to Get a Venture Capital Loan?

With a traditional bank loan, the bank will look at your credit and assets to determine whether you qualify to borrow the money. Venture capital works differently. With a VC firm more emphasis is placed on the product or service your business is offering. The VC firm will want to see that the money they loan you will make them substantial money in the end. They tend to like innovative ideas, or business plans that look great and will generate a great income. As a general rule, they will want to see an investment of 3 to 5 times what they loan you.

How Much Can I Get with Venture Capital?

Since venture capital firms expect to receive a huge return on their money, they typically want to deal with larger investments. If you are looking to borrow under $250,000 you may have a hard time finding a venture capital firm to fund your investments. Smaller investments won’t pay off as well in the end.

What Do I Need to Do to Get Venture Capital?

You need to first come up with a good proposal to present to the firm. Your proposal should include information such as what your project is, the financing you need, your marketing if you plan on using any, your past successes and other history, description of the investments you plan on making, as well as financial statements and biographies of everyone involved.  The firm will then review all the information you’ve presented and start the process of deciding if they feel you are worthy of their money.

Paying Back the Loan

Unlike a bank where you make monetary payments on the loan, a venture capital firm may want buy-outs in the stock, or mergers with larger firms once the investments are successful. The stock is worth more to the firm if it does well than a simple check re-payment would be. They may also ask for a percentage of the ownership to the business. The way they ask for payback will depend greatly on the firm and their management. You will be given all of this information before any money is exchanged so you have time to think about the conditions.

Venture capital isn’t easy to obtain, but with the right planning you can utilize these firms to finance your business or make larger investments. With venture capital, everyone wins.

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