There are many different kinds of business investments. These include things such as inventory, fixed assets, franchises, derivatives, partnerships, toll roads, intellectual property, and others. These are not all of the available business investment types, but they are some of the more common ones. In this article, I will introduce you to the different types of business investments and what they represent.
Owner Financing: This is the most popular type of business investment, especially for small businesses. It is represented by owning a portion of a company, instead of purchasing shares of ownership. One great advantage with owner financing is that it allows you to finance your business expenses during its early stages. As your business grows, so do your finances.
Angel Investors: Similar to owner financing, angel investors offer small business loans to entrepreneurs that are in need of money for one reason or another. They typically offer financing at a lower interest rate than debt capital. However, you cannot use debt capital for business investments unless you have enough of it to pay off the debt. Therefore, you must have some collateral or equity to secure a business loan from an angel investor.
Lending Investments: These types of business investments deal primarily in purchasing a portion of a firm’s operations. This is different from buying shares, which is what angel investors do. With lending investments, you are typically not purchasing a stake in the business. However, you can purchase enough of a stake to allow yourself to receive profits. Lending investments are not as common as debt capital. You can learn about compare small business insurance quotes
Private Placements: Capital from this category is made available to companies in exchange for them voluntarily selling a part of their business to private investors. This method of business investments has experienced much popularity over the past few years, as many of the wealthiest people in the world have made these types of investments. There is also the risk that these private Placements will not be successful, as few people have become rich through this method. Private Placements generally require the businesses being offered a portion of the firm’s value in exchange for cash payments.
Crowdfunding: This is one of the more obscure business investments. Crowdfunding requires entrepreneurs to raise a pre-determined amount of capital from a number of sources before starting a new business. The funds used for this funding may come from a variety of investors, or groups of investors, but they are almost always from the same community or social networking group.