A simple fact of business is that you can’t operate without funding. Whether it’s at start up or when expanding your operations down the road - or both - there will come a time when an influx of capital is necessary to get and keep the ball rolling.

Traditional loans are all well and good but the fact is, lending institutions are tight with the money these days. Alternative financing may be more worth your time and effort to investigate than you might think. Finding investors and venture capitalists interested in financing your enterprise may just the ticket to get the money you need to build your business.

Where can potential investors be located? The answer is provided in the wisdom and experience of those who have successfully navigated the terrain.

Healy Jones is head of marketing for OfficeDrop, a digital filing system and document scanning service, and is also a former venture capitalist. Healy says, “We raised equity capital about a year ago. I have some pretty strong opinions on what works when trying to finance a small business, since Ive been on both sides of the table.”

Healy provided some tips for businesses looking to raise venture capital:

• Build relationships before you need funding. Get to know the lay of the land in your area. Early stage investing tends to be quite geographically local business, so networking can really help you a) figure out what types of financing are available and b) get into the right networks so that you can get warm introductions to investors.

• Venture capitalists really, really prefer introductions to new companies from people they trust - much more than the "cold" business plan submitted via the web. The best introductions to investors come from successful entrepreneurs (especially ones that have worked with the VC before).

• Understand the "metrics" side of your business - what you measure and what it means. Having a great instinctive feel for your business is not enough. Venture capitalists will pick apart everything - projections, operations, sales strategy and vision. VCs are financiers and you will need to be able to speak their language. The ability to talk about your operations, growth, etc using numbers is critical to impressing venture professionals.
  

Lowell Bike who launched myautotips.com earlier this year applied some valuable advice while creating his business plan for possible investors:

• Do not overpromise. This applies to not only the return investors can expect, but when they can expect it.

• Let them dip their toes in the water. To turn a smaller investor into a larger investor you can show her all the projections you want, but until she sees actual results to back up the projections she will not be comfortable making a larger investment.

• Do not give up any of your decision-making ability. The investor might have a stake in the company, but the person who runs the small business is the expert on what it takes to make money. Do not sacrifice any control of day-to-day activities to secure investors.

It isn’t surprising that cultivating relationships with potential investors is a crucial element of obtaining financing from them. Forging those relationships early on before approaching with your hand out will establish you as a reputable businessperson from the get-go. As opposed to a lending “institution” an investor is a person whose trust you need to secure before they will be interested in funding your enterprise. That trust can be further enhanced by providing solid information, golden references from mutual acquaintances, reliable data and realistic expectations about your business. All those factors figure into the total package in which the investor is staking his or her money.

Once your track record is established, your investors may be persuaded to increase their investment in your business. The more they know about you, your business and its success, the more easily they’ll be convinced that you are a safe and beneficial investment.

Investors and venture capitalists are looking for novel and profitable ways to put their money to work. You can reap the benefits of what they offer by following the advice of those who have successfully secured such investments for their businesses.

Who do you know who would invest in your business?