Investors are always on the lookout for new opportunities. They seek to diversify their portfolio and include a good mix of stocks and bonds. They also like a healthy mix of high risk and relatively safe investments. Some may choose to invest in alternative investments like micro loans, green investing or collectibles, while others prefer the riskier route of investing in small businesses, IPOs and startups. In fact, having a mix of investment options is the best way to minimize risk and diversify your portfolio.
Finding ways to start investing in small businesses can require some digging on the part of the investor. Many owners do not know how to get the word out that they need capital to expand, to move into a bigger building or to invest in new equipment. Most go to their local bank for funds to borrow, which may even be insured by the Small Business Association (SBA). Unfortunately, many banks do not provide 100% of the money needed. They expect the owner to use their personal reserves or to bring an additional investor to the table in order to protect the bank’s interest.
As an investor, you need to let your local bank’s commercial lending department know that you are interested in investing in small businesses. A bank will have already down their due diligence and researched the company requesting a loan. If a loan officer knows that you have the extra cash to invest, they might approach you with hot deals that need additional funds. Another option when searching for investment deals is to contact an area business broker. The broker knows which small companies in the area are selling and which could be persuaded to stay if there was an influx of cash to expand and support future ideas.
Investing in small businesses is also a way to use your investment money to help support the local economy. Such owners usually hire local employees who stop for lunch at local eateries and spend their paychecks at local shopping centers. The money invested makes a nice profit but the reward of helping many people can be far greater. Overall, an investor needs to diversify their portfolio to spread the risk of their investments over several different types of investing. Helping small businesses by investing in their future not only helps the local economy but also helps the investor’s bottom line.