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Private Capital Investors - The
largest source of risk capital
Private capital investors refers
to private individuals who contribute their skills and money to start-up companies.
They often work in groups to improve the efficiency of their due diligence and
to allow them to complete larger deals. The most important considerations to the
investor's decision are the personal characteristics of the entrepreneur and the
market-product potential of the business.
Here are some interesting
facts about private capital investors: - Private capital investors
groups funded 236% more companies in the year 2000 than were funded in 1996
- Of
the companies screened and formally invited by private capital investor groups
to present their business plans, one-third received funding
- Conservative estimates
put the magnitude of private capital investors at approximately $20 billion per
year
- On average, private capital investor groups tend to include 85 members
who look for a 35% return on their investment
- Private capital investors fund
thirty to forty times as many entrepreneurial companies as the entire venture
capital industry
- Research shows that in the United States alone, one out of
every twenty households has a net worth of at least $1 million
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Government
small business loan funders provide businesses with much needed capital financing
through the SBA 7(a) loan program. We actually make the loans and the SBA guarantees
them. It is important to understand that the SBA has no funds for direct lending
or grants.
To qualify, you should meet these criteria:
- You must have a stake in the business. The SBA wants to know that if
you apply for credit, you have invested in your own business. In the SBA's view,
if
you have put your own money into your venture, then you are much more likely to
push harder for the success of the business.
- You should have a strong
business plan. Like banks and other financial institutions, the SBA requires the
submission of a business plan. The SBA wants to see detailed plans on how your
business can make money. More importantly, they want to know how you will be able
to repay the loan and whether your business can earn enough to at least cover
the monthly payments.
- You need a good personal credit rating. The
credit history serves as a person's gauge for credit worthiness. The borrower's
track record in paying their bills will form an important component in the loan
application process.
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