As of late we have seen various initiatives that are trying to spur small business lending in the hopes that companies looking for financing options may be able to grow as a result of getting access to credit but there are arguments that investors may be more helpful to businesses at the present time, particularly in cases where companies may be struggling to find a loan or may simply want to take advantage of the perks that come from working with an angel investor or venture capitalist. While opportunities from the Small Business Administration have always been one route that business owners may take when looking for loans and we recently saw that the Treasury Department was working to help smaller institutions lend more to businesses, there are still complaints in various areas that companies are not getting the financing they want in order to help improve their business.
Yet, if a business does turn to financing from investors, there are those who feel that business owners must make sure they are careful when entering into a relationship with any type of investor, as they may require them to resign some control of their business and this also means that the business owner will likely have to take some direction and share in profits as well. However, some businesses have thrived as a result of outside investors simply because there are not only opportunities for financing available but guidance from these investors as well.
Businesses have to be sure that they do not give away control of their business nor should they act as if they are handing the business over to an investor, but one of the main reasons that companies seek out angel investors or these venture capitalists is because many have experience in the business world and in most cases specifically in the area where they happen to be investing. As an example, a new technology firm will likely get interested investors who have had experience in this particular field and may help businesses better understand how they can optimize their daily operations, long-term growth, and even become more profitable.
Ideally, investors will give businesses not only the financing they need but some guidance as well, and after a set period of time many investors often will exit the business with their profits, but this is not always the case. There are instances where investors may hold a seat on the board of directors of the company or may buy into stock of a company, and while this can be helpful there is also the case where some investors may eventually hold a majority share and this could be problematic for a business owner if they have essentially given over the reins of their company to these investors.
While these concerns may be extreme, business owners are often urged by advisers not to overlook investment opportunities from these resources as small business loans are obviously a form of debt that must be repaid and, in some instances, can provide a long-term strain on certain companies where an investor would not require this type of repayment necessarily, as they are not lending in the traditional sense. No matter what route a business owner takes though, it’s often been suggested that business owners make sure any agreements drawn up with outside investors will not be detrimental to a particular owner but will also allow for opportunities to learn and grow from experienced investors.
