There are a number of reasons why someone might be interested in investing in startup companies or small businesses. Not only is this a way to potentially make some money yourself, but it also is exciting to help new companies get off the ground and grow. If a small business is making a product that you believe in, or simply offers high quality service, you can help them out with funding, which in turn will help make you money as well. However, there are several factors to consider before you go into this type of investment. Be sure to remember that you should never make an investment that you can’t afford to lose.Because small business investments can be riskier than other types of investment, it is possible to lose the money, even for the most promising type of business. However, because investing in startup companies allows more room for growth, without as many investors involved, you could end up making more money in the long run than you would by investing in established companies. The difference comes down more to research than luck. Before you invest in any company, large or small, it’s vital to research everything you can about the company, so that you know where your money is going and how it’s being used.To analyze the company that you are interested in investing in, some of the questions you should ask include how long the company has been in business. Although there is no need to rule out investing in a business that has just started, this could be riskier because there is less of a history or background to investigate. When investing in startup companies, find out more information about the owner or management of the company. Ask for references if you can, and find out how extensive the owner’s knowledge is of the industry that the business is in.If you don’t have very much knowledge of the industry yourself, then you will also want to do a little bit of market research in this field as well in order to make the best decisions. Ask how much say the investors have in the company’s interests, if you wish to have a hand in business decisions. Although investing in startup companies usually doesn’t entitle you to help make business decisions of this nature, in some cases you will be asked to have a higher level of responsibility. Make sure that this is clear before signing any contracts.
The goals of private money lenders are perfectly aligned with yours as an investor. Here are eight more reasons to use private money lenders for your investment properties:1. Private lenders for real estate are offering competitive interest rates. Since a loan on an investment property is secured by a recorded Deed of Trust, private lenders can offer interest rates that are competitive with the open market. Additionally, since private lenders for real estate are looking for investment properties, they are more likely to offer these rates on properties without a current cash flow than traditional banks, which are still restricting lending.2. Loan repayments are still made to a loan servicing company. Private lenders use fully insured and licensed loan servicing companies, so your monthly payments are made to a recognized institution, not to an individual.3. It is less frequent for private loans to be packaged and resold. For real estate look specifically at you and your property to make an investment decision, and once they have found a good risk they are unlikely to sell their investment. This allows you a measure of confidence that you will still be doing business with the same partners for the life of a loan.4. Private loans are faster and more flexible than other loans options. Since private lenders use the same investing principles as you do, they are able to make a quick decision, allowing you to avoid the lengthy process of traditional bank underwriting.5. Your FICO score is not as crucial with private lending. Private lenders for real estate do not rely as heavily on your FICO score, and instead use their investing experience to determine if you and your property are a good credit risk based on all factors.6. Private lenders’ debt service coverage ratio is less strict. Since private lenders do not have the same underwriting process as traditional loan servicing arrangements, they have more flexibility to look at other factors influencing loan repayment.7. Offer shorter terms. Shorter terms allow you to secure the property, avoid prepayment penalties, and look to traditional financing once the property is stabilized if necessary.8. Real estate give you better access to loans, while keeping traditional loan benefits. With private loans, you still have the same protections as with traditional bank loans, but are able to take advantage of a hard money loan process that moves more quickly and is inherently more flexible than conventional permanent financing.