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What is the simplest method for bringing in a new investor to 1 yr old business?

What is the simplest method for bringing in a...

A client has a business which commenced a year ago.

The business is not worth much on paper but it is likely to take off (large orders in pipeline) and she wants to bring in an investor to the business pref through shares to help support the growth. Additional premises is likely to be needed and also purchasing of stock to fulfil orders.

Any pitfalls/ suggestions welcome.  

A % of the equity at present value would be minimal.  I imagine a commercial lawyer will have to be involved to ensure that the legalities of the arrangement are clear especially if a % of future profits is to be expected.

Is loan at fixed % rate better than equity for example?

I would welcome any thoughts on what considerations should be made before making a final decision on how to bring on additional investors.


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30th Jan 2013 15:37

Business Finance for Beginners...

Gosh, you don't want much do you! This was about 3 modules of the qualification I did...

There are some basic pro's & cons here: but you can't really expect detailed advice on such wide ranging questions on a forum like this.

Seriously you should take your client as far as you feel confident doing (have you prepared their business plan? are the management accounts up to date?), and then refer them to other professional advisers if you are out of your depth. The consequences of getting it wrong could be very serious for you.

But if you find another firm that has the experience, you may get a fee for introducing the client, and you can learn more about it as the process unfolds...

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