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Starting your business

Step 2: Obtain funds PART 1 OF 5

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How to find investors

The first question to ask when looking for investors is: How much money do I need?

• Not a whole lot. If you don't need a lot of money, your best bet is family, friends and organizations you're already familiar with.
• Family and friends: Yes, all the plots on the sitcoms end with the warning: Don't loan money to friends and family, but there are ways to do it and keep the friendship.
• Be honest about the risk.
• Make sure the person can live without the money.
• Set a fair interest rate.
• Create a written pay-off plan.
• Put the whole thing in writing.
• Business people you know. You probably already know people through business organizations you're a member of. You can approach those people to see if they'd be interested in investing. The same guidelines for friends and family apply for business acquaintances.
• A lot of money. If you're looking for a major infusion of capital, you need to turn to investment experts.
• Banks. Talk to your banker. You already have a relationship with your bank, and it may be able to loan you the money. If not, your banker may know of local investors.
• Investor and venture capital groups.
• The National Venture Capital Association website, www.nvca.org, lists potential investor groups.
• Active Capital, http://www.activecapital.org, is a national organization that links investors and entrepreneurs.