If you were to ask a small business owner where to get financing, they would probably be able to immediately list a few options. Chances are, they have a bank account somewhere, so the bank may be their first suggestion. Then, they may recall where they got their financing when they needed it.

However, if you were to ask them where to access private equity financing, they may not be so sure. Most of the time, when this topic is mentioned, they will suggest that you check with an attorney or accountant, or they may mention a private equity investor that approached them at one time.

Unfortunately, small business owners who are seeking capital and private equity investors don’t connect due to a variety of factors. This is typically because small business owners don’t know where to turn or there is a shortage of capital providers in their area. In addition, most private equity investors are only interested in businesses in a specific industry, certain cash flow profiles, and of a certain size.

Private equity investors look for companies they understand, with a management team they can connect with. They also prefer to invest in companies where they can add value. Beyond that, they place priority on transactions that benefit their fund.

In order to determine if private equity financing is right for your business, you must understand that there are advantages and disadvantages:

Advantages: Private equity financing provides you with capital beyond what you would get through traditional financing, as well as the chance to pursue a growth/acquisition initiative.

Disadvantages: Private equity financing can be expensive- traditional financing is almost always going to be cheaper.

The biggest problem isn’t financial but allowing an outsider in as a business partner. In traditional financing, the lender isn’t involved with the day-to-day operations of your business. They need regular statements and payments, and need you to abide by the terms of the agreement- but that’s all.

A private equity investor, on the other hand, is hands-on. If you do not have a board of directors, they will make one. If you do, they will take a seat on it. Then, they will set a strategy and create rules for future infusions of capital.

Private equity investors want to work with entrepreneurs that will be good partners and accept advice and feedback for growing the company.

If you’re interested in pursuing private equity financing for your business, take your time and do your research. Don’t wait until you need the money to get started with your search but build relationships and bridges ahead of time. Ask your accountant, lender, or attorney if they know of any private equity investors in your industry and area. Additionally, contact Abundant Wealth Financial for more information. We can help you determine if private equity investing is right for you.