Investing in a company can be an exhilarating feeling. It provides you with a new learning opportunity, new experiences and a new challenge.
As for the business, the investment provides them with the support they need to grow the business in their respected industry. Despite being an exciting new adventure, investing in a business is not as easy as you may have imagined.
Without proper planning and careful consideration, a poor investment opportunity could have a significant impact on your financials in a short period.
Naturally, any investor wants to see the money they invest bring back a return that tops their original investment. It is achievable, but there are a few things to consider before you invest. Here are just a few of those factors.
Utilise The Enterprise Investment Scheme
The EIS is a government scheme to help early-stage businesses raise finances by offering generous tax relief to investors. One way to utilise the Enterprise Investment Scheme is by investing alongside funds such as Oxford Capital. Using their wealth of knowledge, the alternative investment manager invests in a portfolio of early-stage businesses from some of the UK’s leading technology sectors.
While investing in early-stage companies through the EIS scheme is a high-risk strategy they also offer some attractive tax reliefs such as 30% income tax relief.
Have A Clear Understanding Of The Business Structure
As a potential investor, you should take the time to understand the business structure. Depending on the business structure, you may find that you are responsible for covering any unpaid bills or liabilities should the business fail. Before investing, carefully consider limiting your liability. If the business that you have invested in does not succeed, you will not be liable for covering any costs.
Potential Slow Returns
When investing in small businesses, remember that patience is a virtue. Small businesses often need all the money that they can get. For you, this means that it is unlikely that you should expect to see a return on your investment soon. Understand that it might be a few years until you start to see any returns. It is especially true if you are investing in an early-stage start-up. Remember that investments are about the big picture. As such, it should not be a surprise that you will not see any returns for the first couple of years after investing.
Investing for the first time can be a mixture of emotions. It can be exciting, challenging and stressful. Most of all, investing is highly rewarding. Before investing, ensure that you have prepared yourself for the challenge. Have a clear understanding of what you are looking for in a business. Know how to manage your investments and what you should expect in the long run. Investing in your first business can lead to a profitable endeavour. It can be mutually beneficial for your individual investments and businesses being invested into.