• Section: Money Guide - Category: Home Business
• Written by Anidhanta

State laws have been relaxed to make it easier for small business to raise start-up and growth financing from the public. Many investors view this as an opportunity to “get in on the ground flora

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Above all, never let a commissioned securities salesperson or office or directors of a company convince you that the investment is not risky. Small business investments are generally hard to convert to cash (illiquid), even though the securities may technically be freely transferable. Thus, you will usually be unable to sell your securities if the company takes a turn for the worse.

In addition, just because the state has registered the offering does not mean that the particular investment will be successful. The state does not evaluate or endorse any investments. If anyone suggests otherwise, they are breaking the law.

If you plan to invest a large amount of money in a small business, you should consider investing smaller amounts in several small businesses. A few highly successful investments can offset the unsuccessful ones. However, even when using this strategy, only invest money you can afford to lose.

Analyzing the investment
Although there is no magic formula for making successful investment decisions, certain factors are considered important by professional venture investors. Some questions to consider are:

Ø How long has the company been in business? If it is a start-up or has only a brief operating history, are you being asked to pay more than the shares are worth?
Ø Consider whether management is dealing unfairly with investors by taking salaries or other benefits that are too large in view of the company

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