Accepting an investment and expertise from someone that can help your business is a great achievement for you as a business owner. But it cannot be the simplest options always, there can be many complications involved in it. These are the top 5 things you should always remember before accepting an investment.
1) Investment structure: When you are accepting an investment from outside it is important to understand the structure of the investment, how you are accepting it and how it is going to affect the business. There are many ways the investment can come in the business and it can drastically change how the business is handled.
2) Common or preferred shares: When someone is investing in your business, they are actually providing the capital in return for the shares; they can either choose the preferred shares or the common shares. If they are getting common share both of you will be on the same level, whereas the preferred shares will put the investor in a strong position higher than your level. Visit BullMarketz.com to know more about shares.
3) Anti-dilution clause: This clause is important when you have to include other investors, every investor will try to include the anti-dilution clause that will protect their shares but as a business owner you will have to negotiate it benefit you.
4) Liquidation: The liquidation process is also different for the external investors as they get the preference first and it also depends on the clause which defines how they are getting paid. So it is important to make sure the liquidation will benefit you also.
5) Covenants: Covenants in simple terms can be said as promises. The investors often expect to give some covenants in return of their investments. As a business owner, you have to make sure they do not ask for something that you cannot offer.