Business investment refers to the committed financial investment of resources into a business either in an active management capacity or simply as an investor. A business owner can invest in many different ways, but typically business investment is viewed as being for acquiring a tangible asset such as land, building, and equipment that will create value over time. The tangible assets that a business owner may acquire are almost always in cash, property, plant and equipment, and investment securities, and a few other types of assets. In the past, many business owners used their personal credit score or assets to acquire business investment; however, with the advent of the subprime mortgage crisis, business owners are strongly encouraged not to borrow money on their credit cards or other available credit accounts in an effort to raise business investment cash.
Many businesses offer funding sources, such as venture capital, angel investors, and loans from banks and credit unions. A venture capitalist is a private investor who usually provides seed money, which is less secure, to new businesses that have not received prior approval by the Small Business Administration. Angel investors are also an excellent option for business investment, but they must be recruited from a pool of qualified entrepreneurs, and business plan requirements must be provided to them as well. Loans from banks and credit unions also require collateral, and the quality and value of these loans are often dependent upon the credit worthiness of the business owner.
As an investor, you have several business investment options to choose from. First, you can choose to fund a start up investment, which usually means that you finance the complete start-up costs of the business, including office furniture, marketing and advertising expenses, legal costs, and salaries and wages of key employees. A private investor typically requires more collateral than a bank or credit union would, and you typically cannot withdraw from your initial capital position until a year after your business has closed. A small business investment through a venture capitalist or angel investor can be a good option for business investment, if you have the capacity to raise the necessary capital.
Export Invoice Finance is a business investment opportunity that has traditionally been a minor source of revenue for small businesses. Exporters usually arrange for their own invoices to be export authorized, which then becomes a part of the company’s books. However, the advantage of exporting invoice finance is that it can create a significant cash flow, and there are few limitations on the type of merchandise that can be financed.
Debt and equity financing includes lines of credit and debt guarantees from investors. The advantage of these forms of business investment is that they are secure and do not require a down payment or long term commitment. They also allow business owners to raise a significant amount of capital relatively quickly, and at higher interest rates than would be available to them from other sources. Equity and debt business investment is more difficult to qualify for than debt and equity financing from banks.
Most people are familiar with business investment, but less familiar with some of the alternative business investment options available. These include: limited liability company (LLC), partnership interests, limited liability corporation (LLC) and corporation (inc.) If you are considering investing in business opportunities that fall into one or more of these categories, you should seek professional advice from qualified business investment advisors. You can improve your chances of success by being well informed about the different types of financing options available.
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