Tip 1: Include your personal background as it relates to your proposal. Be sure to include your experience, education, applicable training, or any other personal qualities that would help the investor get to know you a little better. If you have a great loan repayment history, be sure to include that as well.
Tip 2: Disclose all expenses. Explain in detail exactly how the capital you are requesting will be used. If you are requesting money for an existing business, include your profit and loss history for the last 6-12 months. You will then need to show how the requested capital will allow you to increase to even greater profits. If you are requesting capital for a new business you will need a detailed business strategy, market research about the projected costs, and anticipated profits over the next 3-5 years.
Tip 3: Base estimates slightly higher. It’ll be in your best interest to base your cost estimates high, and your income projections on minimal returns. This will provide a little cushion during those times those extreme ups and downs, that can’t be predicted by even the most seasoned economist. Be sure to explain just what makes your business stand out from the rest and how you are more attractive than your competitors. Also, stress the importance of expansion and the future addition of products/services. This argument can be used to justify your cushion as well!
Tip 4: Sell what you are offering. Now it’s time to get into marketing mode. No one should be better at selling your dream than you. Perhaps the most important question that all investors would like to know is, what exactly are you offering that is worthy enough of my time and money? Your investor will want to know how much interest are you able to pay; will the payments be monthly quarterly, or annually; are you offering a percentage of the profit, the business or a position on the board of directories?
Tip 5: Never try to con an investor. Transparency is always key! Investors are usually quite familiar with “high risk” proposals, yet they all want to minimize as much risk as possible. Therefore, your proposal should include a listing of your business and personal assets with documentation—usually copies of your tax returns for the past three years or more. The potential investor may not know anything about you or your business, but if they want to know, he/she can conduct a simple background check and find out everything that there is to know about you in as little as 24 hours.
An investor uses his/her money to make more money. They want to make as much as they can, regardless whether it’s a short-term or a long-term deal. In order to attract, interest, and persuade the individual to invest in your business, you’ll not only have to offer an opportunity for big profits, but you’ll have to spell it out in detail, and further, back up your claims with proof from your marketing research. For the most part, if you have a great idea, you’ve conducted great research, and your business is profitable, your investor will likely understand your position and make an offer.