The Pros And Cons Of Private Capital Investments For You As A Business Owner

A new business requires funding, and you do have options. Securing private capital investments is one way to get the funding you need, but there are some perks and pitfalls to these funding arrangements.

Pro: A private investment is not the same thing as a loan.

Business loans are a great way to get your business up and running, but loans have to be paid back no matter what actually happens to your business. When you obtain a private capital investment, the investor knows they are taking a risk, and there is a chance they may not get a return if something happens and your business fails. Investors who make this move are taking the risk because they're interested in a share of your profits, so if your business fizzles out and makes zero profit, you're not going to have an investor chasing you down to get their money back.

Con: Accepting private capital investments can mean lower profits for you.

Of course, an investor is not just going to hand you money without expecting something back, and what most are interested in is a share of the business profits as your business grows. As long as your business is successful, you will likely enjoy plenty of profit for yourself, but some of what you bring in will have to be handed back to those who had faith in the success of your business and invested their own funds to help you and themselves eventually in a financial way.

Pro: No one is going to care about your credit history.

When you go out and get a business loan, the lender is going to check out your credit history. When you seek funding from capital investment, however, your credit score will likely never even be brought up because it won't necessarily matter. You will be bound by a contract to share profits or do whatever it is that the investor wants you to do, so this will be important to do. However, it won't matter if you have loans you have never repaid or too many derogatory remarks on your credit.

Con: It can be harder to find a private capital investor.

The stakes are pretty big for a capital investor — there's a potential to make a lot of money but there is also a potential to suffer a massive loss. Therefore, it can be a lot harder to find a willing investor; you have to have a pretty stellar business plan that is almost guaranteed some level of success to find an interested party.

To learn more about private capital investment services, contact a company like Overton Capital Corp