Finding the Right Investors 1 . Leverage Your Network
Start by reaching out to family , friends , and colleagues . Don ’ t hesitate to tap into investment clubs or online communities . You ’ d be surprised how many people might be interested in investing if they see a solid opportunity .
2 . Be Creative
Private financing can take many forms , from mezzanine financing to equity stakes . Tailor your approach based on the specific deal and investor .
Understanding Cash vs . Guarantee
In many situations , banks will finance a portion of the deal but expect you or an investor to cover the shortfall . For instance , if you need R1 million to finance your project but the bank only offers R800,000 , you ’ ll need to come up with that extra R200,000 .
Alternatively , you can work to persuade the bank to offer you 100 % financing against a bank guarantee for the shortfall . This means you don ’ t have to dip into your or the investors own cash reserves . Instead , your private investor can provide a guarantee that allows them to secure the financing without pulling cash from other investments . This is a game changer for investors because it keeps their money working for them elsewhere while still backing your deal .
Profit-Sharing Basis
Now , let ’ s talk about how to structure deals with private investors . A good rule of thumb is that what investors put in — whether cash or guarantees — should align with their share of the profits . If a private investor contributes 30 % of the funding , they should generally receive 30 % of the profits .
But if you ’ re not putting in any of your own cash , you ’ ll need to justify why you deserve a bigger slice of the pie . Here are three key points to make your case :
63