OPM. Other people’s money.
In the world of investments that’s usually how an enterprise gets funded. The days of banks being the leading (or only) source for loans and funds for investing have been waning for quite some time.
Have you taken advantage of using funds from private investors to fund and grow your company? If you have, you know that it can be an adventure, but it can also be a positive way to grow and expand. But if you take this road, what should be considered in handling other people’s money?
Here’s a list of considerations:
- Involve a third party, like an attorney or money manager, to accept, handle and return money.
- Set up separate accounts just for the private lending cash; also consider not co-mingling the cash from multiple investors.
- Consider assigning each loan a specific role—i.e., operational improvements or warehouse expansion.
- Be sure and follow your state’s regulations on reporting and filing any reports.
- Repay your investors promptly and to the plan agreed to. Continue to pay interest until their portion of the investment is paid off.
Whatever you do, start with a clear plan and then stick to it. As the saying goes, “those who fail to plan, plan to fail.”
For more on how to work with investment groups and individuals and handling investor’s money, call or write to us. TFO Solutions is dedicated to helping entrepreneurs and business owners with their financial strategy from the back office to the boardroom.
**photos courtesy of Unsplash (Allef Vinicius and Sharon MCutcheon, photographers)