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I am opening a sporting goods store and need $40K to proceed. I am meeting with a venture capitalist in appx two weeks to present my business plan. I have an existing business that is profitable but I have never dealt with a venture capitalist before. Can you give me a general idea of how venture capitalists expect to be repaid, what kind of interest and term they expect, and what kind collateral considering the amount of funds I am seeking?
First off, VCs dont invest $40,000. Its WAY too small of a check for their time. The smallest Ive seen a VC (in the past few years) invest is $100,000 - but very few funds do that.
The person you are meeting with in 2 weeks is either an Angel Investor, or a i-bank/broker who is gonna hook you up with "venture capitalists". If its an Angel Investor (a rich individual) he will write the check directly. If its a broker, he wont write a check, rather you will pay him.
Also, note that most i-banks and brokers wont work on that small of an amount as their commission is so low its not even worth it! The third choice is that you are meeting with a bank loan officer. This is also your best option for $40k. Take out a small business loan and pay it back over 5 years at 7% (or something).
If its an Angel Investor, that's good too! An Angel will usually want stock in your company, as opposed to a loan. This is a great source on Angel Investing:
How To Raise Your First Million Dollars
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