How to Raise Investor Finance
If you are a budding property developer based in the UK requiring investment to facilitate your next project, finding a private investor could be critical for your success. Not only would a private investor provide vital capital investment, they could supply knowledge, mentorship and assistance to make all the difference for your business survival or growth.
A private investor can be a company or an individual, but they are generally classed as high-net worth individuals that choose to invest their own money and experience into businesses, with the sole aim of achieving significant financial return from a potential exit. That being said, you may find yourself with a private investor amongst your family or friends, with enough confidence in your ability and a few grand to spare. This blog post will delineate a few ways in which you can pursue private investors for your next project.
Construct a developed and convincing plan
You will have little luck securing a private investor without a solid, compelling plan to present them with. With a combination of the right marketing and careful calculation, it will just become a matter of circulating the deal amongst the right people. Any investor will want to know why you are choosing to buy in the market, so give a comprehensive description of the area in which the property is located and outline what the margins are for investment. List your resources and outline your experience in regard to buying, building, fixing or selling property. Set exit strategies and timelines so that it is easy for potential investors to see what the upside is for them, to gain confidence in you to execute the plan and to secure them a decent return.
Start with your inner circle
Approach your family and friends first, as they know your background and are more likely to invest in you over a stranger they’re unfamiliar with. They may need a bit more convincing than a seasoned investor, as they probably have never been involved in investing before. They are also likely to want more regular communication with you throughout the process, but they will probably expect a little less return than professional investors. You also hold the potential to make a big difference to their lives when you make some money together.
Make the most of networking opportunities
Attend business or property networking events, when you can, to meet potential investors that could be attracted by your proposal. Take copies of your investment plan and several business cards just in case but try not to be to pushy. Make sure you ask people what they want so that you gauge their interest before presenting your opportunity. Be a regular attender too, it’s hard to build trust in one meeting but if you are present of a period of a few months you will start becoming very familiar with people and that familiarity builds trust. Be patient and be present.
Utilise online resources
Online business angel networks are valuable sources of potential investor information, providing the opportunity for you to pitch your investment opportunity to experienced, high-net worth individuals across the country. Angel investing is the most significant source of investment in startup and early-stage businesses seeking equity to grow their business. Whilst the market is relatively difficult to calculate since many business angels are investing privately, an estimated £1.5bn per annum is invested by angels annually in the UK. Equally, running an advertisement online presenting the opportunity alongside your contact information could initiate important conversations with potential investors.
You are providing a valuable service
Some people say raising investment is like glorified begging, far from it. You are a service provider. Your hard work in pulling a deal together, using your time, contacts. knowledge and experience is something which most investors do not have the time or ability to do for themselves. You are of serious value to them and you are not asking for money you are offering an opportunity. Remember that. Investors have money and if you can make them more with very little effort then they will be very receptive, make sure you remember your value in every conversation.
Security is everything
What is more important than a return on investment? One thing, that the capital invested is as safe as it can be. Obviously every investment by nature carries risk. It is your job to minimise that risk. First you do this by ensuring the deal stacks, then you offer security. Normally security will be by way of a legal charge, which ultimately means the property can be repossessed, sold and the money be recovered that way. And/ or you will probably need to give a personal guarantee. Remember if your Net Worth is £50,000.00 a personal guarantee on a Million will probably not hold any weight, be realistic with the amounts you are looking to borrow and find the security necessary weather that be by negotiating a charge with the senior debt lender or by bringing in a partner who could substantiate a guarantee.
Finding the ideal private investor hangs largely on two things- constructing a fool-proof investment plan with a convincing opportunity, and your ability to initiate conversation with the right people. Spend some time perfecting the plan and tell as many people about it as possible, and before long you will have secured a private investor to progress with your next project.
REMEMBER – KEEP IT LEGAL
Don’t fall foul to the financial promotions act. If you are advertising for investment you can not use specifics such as detailing the exact investment or return without first qualifying the potential investor as a High Net Worth or Sophisticated Investor. If you are unsure seek guidance from the Financial Conduct Authority website.