Exploring Investment Opportunities for Small Business Owners: On and Off the Balance Sheet
This week, we’re diving into a fantastic question from a YouTube commenter: What are all the different ways a small business owner can bring in outside investors to help their business grow?
This blog will serve as a comprehensive guide to understanding the types of investments available and how they impact your business, touching on both on-balance-sheet and off-balance-sheet options. https://youtu.be/K_y2ihtc95kWhy Understanding Business Investments Matters
Whether you're looking for a cash injection to grow or diversify your business, understanding your options can save time and money. Investors can contribute in different ways, which impact your financial statements and overall business structure.
Let’s break it down by examining the balance sheet, which organizes assets, liabilities, and equity.
On-Balance-Sheet Investments
Types of Liabilities
Liabilities are obligations your business must repay. Here’s a breakdown:
Current Liabilities (Payable within 12 months):
Accounts Payable
Credit Cards
Short-term Loans
Long-term Liabilities (Due beyond 12 months):
Business Loans
Mortgages
Equipment Financing
Subordinated Debt and Preferred Shares
These hybrid instruments often come from private equity firms or family and friends, providing flexibility in repayment and returns.
Common Stock
Represents ownership in the company. Typically held by founders, business partners, or close associates.
Off-Balance-Sheet Investments
These options involve resources that don’t directly appear as debts on your financial statements:
Equipment and Vehicle Rentals
Renting instead of buying helps reduce upfront costs.Leasehold Improvements
Landlords may invest in renovations in exchange for higher rent.Supplier Financing
Key suppliers may offer extended payment terms or trade credit to support inventory growth.
Conclusion: Make Your Business Investor-Ready
Understanding these investment options can help you strategically grow your business while maintaining financial health.
If you want to dive more deeply into this topic, my Business Buyer Advantage: Online Training program was recently updated to include an entire new module just on raising private capital.
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