Finance

Posted 02 May 2020, Editor's Desk

Transform Your business Creditors Into Investors



How to make your Creditor an Investor in the business?


It is always an unnerving experience when you have to make your business creditors an investor in your company. However, getting an investor on board can help grow your business in many ways- from an increase in inventory to experience in the trade and even talented human resources. But why will someone invest in your company when he can give you that money on loan and earn interest out of that.  Here are some tips on how to transform business creditors into investors:



1. Adaptable Business Plan


  • The business environment is highly dynamic and keeps changing. In this scenario, new opportunities will also arise and with these changes your business will also grow along with a rise in your market share and revenue.
  • But there could be times when there is a slowdown; hence your business plan should be adaptable to the best and worst circumstances.
  • This gives your creditors in business the confidence that the company will be able to survive during harsh times as well and will lure him to invest in it.



2. Financial Performance


  • Financial viability plays a key role for anyone to invest in a business. You need to prove to the investor that the company is financially healthy especially when you are seeking funding from a bank or a venture capitalist.
  • It is the potential high returns that will make them cross the bridge from a business creditor to a business investor.
  • An investor should be guaranteed his money is safe and this can be done by showing proof of the assets and liabilities, revenue streams, acquisition cost etc. 



3. The Role of the Investor


One thing both you and the investor should be clear about is that what is expected from the investor. Is it only money or is there something else lacking in the company. The objective needs to be defined clearly as this can help business creditors turn into investors. 


The objective needs to be defined as to what is the purpose of capital requirement. For e.g.

  • Develop new product line/Business expansion
  • Bring in specialized human resource talent, hence hire additional employees
  • Spend on branding and marketing
  • Or bring in the experience and background of the investor to grow your business



4. Company/Product Uniqueness 


  • If your business creditors can envision the problem you are trying to solve through your business model or product and how large the market size of that problem is, then surely they will be interested in switching sides.
  • If your business has a competitive advantage and you can also offer something exclusive to the business creditors such as marketing and distribution rights of a region, it will be a bonus incentive for them to join in. 



5. Exit Opportunity 


  • If you want to transform business creditors into potential investors, they need to see a viable exit opportunity as well in your business.
  • While they are rooting and supporting your business, they are also looking for a return on their investment. Also, be sure of what you want out of the exit as well.



Business creditors can always be potential investors, but you as an entrepreneur need to make sure that there are enough substance and uniqueness in the business for creditors to take the plunge into investment. The idea is that it should be a win-win situation for both you and the creditor. 


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