Can Individuals Invest In Small Companies? We Explore

Perhaps you have been wondering if you can invest in a small business as an individual. The short answer is yes. However, you need to be cautious and learn everything you can about what it involves. Any investment comes with its benefits and risks. You must ensure you can afford to face the risk if anything bad happens. On the other hand, you should also recognise which businesses have a high potential to succeed. Our tips will help you to start learning all you need to know about your investment journey.

Support Promising Businesses

Investing in a small company is an excellent way of supporting your local area. However, you can also take it as an opportunity to help businesses that are active in an industry you are particularly interested in. For instance, if you are enthusiastic about technology and how it can help us in the future, consider supporting start-ups that are working on exciting projects that could change the world. Before you proceed with the investment, make sure the business does something you truly care about and that it can truly succeed.

Determine What Risks You Might Be Facing

Whether you are an experienced investor or are only starting your journey, you must be aware of the financial risks and dangers of investing in businesses. One of the biggest risks is losing the entire amount of money you invest. When buying shares or using other ways to support a business financially, you are using your capital. Small businesses and start-ups are often only at the very beginning of their journey. Therefore, you need to be aware of the danger that the company might fail, and you may end up with a loss as a result.

Explore The Benefits Of Investing In Small businesses whilst taking advantage of tax relief.

Even though you must be aware of the risks investing in companies of any size brings, supporting small businesses can have advantages. For instance, if you decide to invest through Oxford Capital’s Growth EIS, you could take advantage of EIS Tax Relief  of 30% income tax, alongside other benefits such as tax-free gains, CGT deferral and loss-relief, whilst investing in early-stage businesses with the potential to grow.

Learn More About The Company

Before investing in a small business, you need to learn more about the company. Study their business plan and see what risks might affect you if anything goes wrong. You should also research the market you have decided to enter. Look at the competitors of the company you chose to support and see what they are doing differently and how successful they are. Take into account the financial projections of the business and what they plan to achieve in a specific period. With enough research, you will be able to make an informed decision and weigh up the risk to reward. 

Have A Meeting With The Business Owners

When you decide that you would like to invest in a particular company, arrange a meeting with the business owners. In the meeting, you can express your interest in the company and tell them how you could help the business. Talk about your expectations and ask about anything that worries you or is unclear from the resources you have read so far. Take it as an opportunity to make sure that all of you are on the same page. The meeting can help you to solidify your decision or make you look for a different company if this business comes with more risk than you can afford.

Ensure The Deal Is In Your Best Interest

Once you know that the business owners are interested in your help and involvement, talk to them and your lawyers to ensure that the deal is in your best interest. Come up with terms and conditions you would like to see fulfilled through the partnership. However, you must be prepared to negotiate and come to a compromise on some points of your plan. Before the meeting, have some alternatives ready and listen to the business owners. They will be able to tell you what they can afford to offer you in return for the investment.

Keep An Eye On The Business You Invested In

Your journey does not end with the investment. When you put your money into a small business, you should keep an eye on how the company is doing. Business can be unpredictable, and you should be ready to take action if things start to go wrong. You should also continuously study the market to see where the company stands and what it means for your investment. By staying informed, you might be able to prepare for any impact that comes from the growth of the business you support.