The thought of turning to other people to finance your business is an unappealing one for many entrepreneurs.
Maybe you feel embarrassed to be asking for money. Maybe you’re afraid of giving up a percentage of your company. Maybe you think there’s no way forward in business if you have no money of your own.
Sue Nelson has never used her own money to finance her real estate investments. She’s always brought in investors, and it’s never hurt her one bit.
In this video, filmed at the Platinum Mastermind in Curacao, she talks about using other people’s money to finance your investments.
THE MYTHS OF USING OTHER PEOPLE’S MONEY
If you think having no money is an obstacle to business success, think again. Sue Nelson was broke when she started real estate investing, but she recognized that she could bring in investors and share the equity with them.
It turned out to be a wonderful choice for her. She gets to buy the property and they get a great return on their investment. She owns half of the property and they own half.
Also, remember that you’re doing prospective investors a favor by offering them an investment opportunity, so don’t feel embarrassed about asking for money.
If you think everyone out there is broke and no one is investing, you couldn’t be further from the truth. Many people are investors with plenty of money at their disposal. You have the opportunity from international money as well as local investors.
Finally, needing other people’s money is not a sign of hardship on your part. Many large and successful businesses have plenty working capital at their disposal, but they still choose to turn to external finance to expand their business. They do this so as not to disrupt their day-to-day operations.
HOW TO WORK WITH INVESTORS
There are two main ways to use other people’s money: debt and equity.
In the case of debt finance, you can take advantage of banks’ offers of short-term financing at a lower interest rate. In this case, once you repay the loan and the interest, the debt is paid and you part ways with the bank.
In the case of equity finance, you are giving up a percentage of your company. Think carefully about this, because whoever you turn to for money will become your long-term business partner.
They will usually want certain information from you. Make sure you have prepared a business proposal, an expansion plan, a marketing strategy, a financial projection and an expected return on investment.
The best investors will require a very clear plan from you, or they will forget about you and choose to work with someone else who does.