Do they have a proven business plan? Most importantly, have you understood it thoroughly and will you be able to explain it to others in the same way your business representative does it for you? If the business plan is complicated or if you think you will not be able to explain it to others, you should pass on this deal.
If they say, “If you get funding or a lead investor, we’ll follow.” And what that really means is, once your first round of financing is completed by someone else, we’d be happy to give you more, but let someone else take the risk.
When it comes to private money, you are competing for the same investment dollars the financial advisor is. The Private investor has a choice about where they allocate their money. The Ameriprise or Merrill Lynch representative certainly has a home for that money – and all of it. You’ve got to stand your ground to get a piece of the pie.
Is the yield on your money better than other Investment opportunities? For example, earning 10K on a 200K cash investment in 9 months is the equivalent of 6.7% interest. Could I invest my 200K someplace else with less risk and make as much? Do you want to establish a minimum yield?
Friday night is our Boys’ Night Out, and it often takes place at Sweeney’s Uptown Grille in Garden City, NY on Long Island. A couple of years ago, Nassau [County] Off Track Betting Corporation extended its reach into bar/restaurants that beam its out-of-town races on closed circuit televisions. Sweeney’s participates in the program. You buy a betting voucher from the bartender at the sum of your choice, activate it in a self-service wagering terminal, punch in your bets, and the machine keeps a running credit (on losses) and debit (on wins) tab on the voucher as the results come in. It’s easy.
Does the business have an online presence? Without that, you won’t make ANY money. The best way to bring in more people is through the Internet. The business should maximize Internet marketing opportunities.
The fact remains, as history has dictated time and again, an economy built on fluff and illusion is doomed to failure. A civilization too self-absorbed to pay attention to its competition will end up in the second tier or even as a civilization in past tense. Instead of a bonafide business model, so many financial people love to model, we had instead a game of musical chairs. When the music stopped, the fun really started. People found themselves without a chair.
Most private investors are savvy business people themselves and will understand a good business transaction when they see it. They will also be able to see through any scam someone may try to pull. Private lenders are not going to invest in a bad deal. If your business idea has merit then chances are the private lender will discuss terms with you. You are not obligated to take the terms of their loan anymore than the lender is obligated to fund the loan. Negotiate the terms to see if you can get a lower interest rate if you think it is too high. Don’t be afraid to ask for a lower interest rate or a longer period to repay.