Funding sources - Part 1

Almost all inventors need extra funds to bring their product to market. But where to find these loans? Who can invest? There are other ways to get financial help as well as through investments? These are the questions we will answer in this article into two parts.

Loans from private

Finding people to invest in the early stages of your product development is usually the easiest and best way to get your project started. Below are the most common forms of individual investment.

Car Financing

Flows may be money from savings or checking accounts, credit cards, personal loans, or sale of personal property or stocks.

Family and friends

Investments from friends and family are often the easiest to get investment to start your product development. But do not take advantage of their trust, asking too much. Bring a product to market is a high risk and do not want your friends or family to lose too much money, and potentially ruin your relationship with them, so do not ask for more that 10% of their money invested. It 's better to ask a bit' of money from many people, a lot from a person.

Investment Industry Insider

Obtaining investment by industry insiders are the best investments you can get why people invest once, want to see happen and can help you, or introduce all the contacts that can help with its internal market advice to make and sell your product. Read our article, the first steps in raising money to find more information on the achievement of the work force.

Angel investors

Business angels could be anyone, such as: your dentist, neighbors, people at church, or even the parents of the friends of your children. You probably do not know much about the business, and do not want any involvement, but angel investors can give you the necessary investment to get started. Once you get your first investor presentation ready, do not be afraid to start approaching potential angel investors. You probably know dozens of people who could invest.

Now, most people have less money to invest, then you want to find a number of angel investors and ask them for small investments. It will be easier to find three or four investors to make a small investment that will be to find an investor to invest a larger sum.

Angel investor groups and trade unions

Thanks to the economy, individual angel investors are investing less, but angel investors are increasingly becoming part of angel groups or unions. Investors join these groups to pool their money and spread their risk. These groups save time for both investors and entrepreneurs. Entrepreneurs can submit their products to many potential inventors at one time and collect more money from an individual angel investor, and investors save more time because of the selection process of the group or not before hand to eliminate the business too risky, or not qualified.

Because of the screening process, expect to answer difficult questions. Only a small percentage of entrepreneurs looking for money from unions or groups who receive it, so make sure that your presentation, and financial information, is dynamite.

Financing by producers

The financing by producers are often not genuine investments. Manufacturers have a lot of resources and, sometimes working deals with a manufacturer may not cost them a bit ', or nothing, but can be a huge savings for you. Manufacturers often make these types of investments when you have already signed some sort of agreement with them, or intend. When you make an agreement with a producer, as for the production of the contract, you can ask for certain investments as part of the contract.

In nature Investments

If you need a machined part, or did some drawings, a manufacturer probably already has someone's salary who can do it for you. The producer is paying these employees anyway, so it really does not cost anything.

Terms extended

Payment terms are usually 30 days. This means that once a manufacturer terminates the production of an expedition, you have 30 days to pay, but even if you have 30 day terms with a distributor, they will not need to pay for 30 days until they receive the shipment. The result? You must have money on hand to pay the manufacturer for shipment before receiving the money from the distributor. This causes a great problem of cash flow by requesting to have large amounts of capital (something overlooked by many inventors). But if you get extended terms from the manufacturer, say 60 or 90 days, will be paid by the dealer before having to pay the builder, you have a lot less working capital. In a sense, are not really save money, as it continues to pay the same amount that the manufacturer would have paid in 30 days, but it allows your money to use in growing your business instead of keeping on hand for pay the bills.

Tooling amortized

When you start the production of a product, there are molds and accessories for other equipment to be purchased to start making your product or to accelerate the process of production and ensure high quality. Usually the producers want you to pay in advance for purchases, but you can also ask them to amortize the cost, which means that instead of charging a fee, which will charge extra for every product manufactured to meet those costs. Even this is not a real saving, but keeps your initial investment low when you have no sales to cover costs.

Prototype and product development

Some manufacturers have equipment and staff to build prototypes in-house. If you work with one of these producers would be a sort of partnership or contract manufacturing, prototyping, and could help with the finishing of product development, provided it can be shown that the product has the potential for sales to justify the they invest their time and energy. Your goal is to show that the product has great potential to make big money it produces, even in a contract manufacturing agreement, to cover the costs of prototyping and development of the product is worth to them.

Final investment

If producers like the product, can buy shares in your company, or at least make loans to launch your product. Also, if you have strong orders once the product is launched, manufacturers often working capital loan.

Joint Venture Financing

Manufacturers also are often willing to enter into joint venture or partnership covenant, if they like your product and believe in your business skills. These agreements can vary widely, but generally these are agreements in which parties they pool their resources and expertise, and split the profits, each of which is specified in the joint venture agreement signed by all parties.

Part 2 of this article will cover the largest fundraising and alternative sources of funding ....