Nowadays, it is quite challenging to raise capital for a startup because of the economic crisis across the globe. Hence, most people tend to employ dept investment as an avenue to raise fund for their new startups. Here, we will look at what debt investment is, how you can use debt investment to raise capital for small businesses, and how investors can invest in small scale enterprises through debt investment.
What is a debt investment?
Debt investment is the act of loaning money to businesses, organizations or institutes in exchange for an agreed return or interest on your principal. It can be in different forms like individual investing in government bonds, treasury bills and others. Those are the most popular forms of debt investment. However, we will focus on debt investments in small businesses.
How investors can invest in small businesses through debt investment
As stated above, debt investment is one of the ways to earn guaranteed returns from once capital. Investors can loan money to promising small business enterprises that can pay an agreed interest on the capital after a particular period.
The period of the debt and interest repayment should be realistic and comfortable for the business owner. Both parties should make sure the agreement is well documented by a trustworthy and recognized attorney.
How small businesses can raise fund through debt investment
Small scale enterprises can utilize debt investment as a means of raising fund to develop their business. Such an enterprise can use different media platforms to notify the general public about the need for an investor. The enterprise should have a readily available business plan and a proposal of how they intend to make money and repay their debt.
Interested debt investors will contact the business owner and discuss a contractual agreement.