Raising capital for your new business

Starting up and expanding a business is tough. In addition to drive, ambition and a great deal of planning, starting and expanding a small business generaly requires capital. Many entrepreneurs look to personal ties to raise cash for a business that is either too new or too small to get financing elsewhere. Often, money is loaned interest free or at a low interest rate, which can be beneficial when getting started.

Think of the people who know you - more than you'd imagine could be prospective investors in your business.

Make a list
The first step to take in finding investors amongst the people you know is to simply draw up a huge list of names. Include in it your family, friends and beyond. The types of people you are searching for are the ones with whom you already have a trusting relationship with, or with whom you can build one with.

Start with the people in your inner circle - parents, grandparents, siblings, aunts, uncles, cousins, in-laws, close friends and neighbours. Next, look at your middle circle that includes people whom you currently and regularly have contact with - business associates, fellow volunteers, members of your church or temple, current or past co-workers, supervisors or employers. Consider potential business mentors or entrepreneurs, people who may be able to give advice and provide good information about the kind of business you're in and whom you either know or could get to know.
Finally, look at the outermost circle of people you know. This circle reaches to past contacts, friends or acquaintances you rarely see, and people you only know through someone else. These should either know your name or think highly of a mutual acquaintance. Think back to teachers, college friends, mentors, professors, coaches and anybody else who might be interested in seeing you succeed. Do you know any angel investors - an affulent individuals who provides capital for business start-up? Add their names to the list as well. Skim through your:

• address book
• e-mail database
• holiday greeting card list
• old school yearbooks
• alumni directories
• employee rosters from old jobs
• even party invitation lists

Right now consider everyone, don't reject anyone. If you think your list isn't long enough, ask a trusted friend or colleague to help you out.
The next stage is to evaluate each person on your list for the following four characteristics:
• Their trust in you
• Their ability to afford the investment
• Business experience - Entrepreneurs are most likely to invest in other businesses
• Lack of emotional baggage - Cross of anyone you feel nervous about entering into a financial relationship with.
Draw up a list of your best bets - people with at least two of these characteristics. Include columns for each person's name, a brief description of why the person appears to be a good prospect, and the best way to contact the prospect.