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How to Find Investors for a New Child Care Business
Finding investors for a new business venture is one of the most difficult challenges an entrepreneur faces. A business cannot begin operating until it has sufficient funding, and banks and investors typically subject start-ups to more scrutiny than established companies. Finding investors for a child care center presents a unique set of challenges because of the required investment in educational materials as well as higher salaries that skilled child care professionals command.
Use Capital IQ to research banks and investment funds that have recently invested money in child care centers or other businesses focusing on children. You will need to establish an account with Capital IQ, which costs $500 for a year-long subscription. Capital IQ is a research portal that is widely used by investors and other professionals in the finance industry. The website is particularly helpful in searching for investors because it lists the companies in the portfolios of banks and private equity firms. Capital IQ also allows you to screen for institutional investors that have a stated focus on specific industries, such as the child care industry.
Use LexisNexis to search for news articles that discuss recent investment activity in the child care industry. An account with LexisNexis costs $300 for a year-long subscription. LexisNexis is a service that consolidates news articles from a variety of publications, and it will help you identify stories about smaller, individual investors who may be interested in backing your child care center.
Search for venture capitalists and angel investors in your area using vFinance. vFinance is a directory of private investors that allows you to search by industry, stage of investment or size of investment. Click on the “Find Capital” tab on the website’s homepage to begin your search. The website’s basic service is free, or you can sign up for a premium account.
Use OneSource to search for other child care centers that may be interested in structuring a joint venture investment with your center. OneSource is the leading directory of small and mid-sized private businesses, and it allows you to search by industry or by Zip code. You can sign up for a free trial on the website’s homepage or establish a permanent account, which costs $200 for basic services.
Contact the United States Small Business Administration, and apply for a loan or grant for your child care business. The SBA provides loans and grants to thousands of small businesses each year. You can download an application from the SBA website or you can speak with a loan official, who will guide you through the application process.
Some banks or investors may ask you to pledge personal assets, such as your house or personal savings, as collateral for loans. Be very careful in pledging personal assets; if you pledge your house as collateral and your center is unable to repay the loan, you will likely lose your house to the bank.
Be sure to review any financing documents with your lawyer before signing anything.
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