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SMEs are the backbone of most developed economies. They are often responsible for producing new technologies, services and products to the global market, and many have the potential to become much larger companies. Whilst they may have a reputation for being a fairly risky investment, they are also seen by many as the most rewarding. In light of this, here are some of the best ways to invest in an SME.
Angel Investment
In recent years, angel investment has become one of the go-to options for entrepreneurs and SME owners. It involves financing a startup business which has a promising business model and plan in return for a stake in the company.
Angel investors are usually afforded direct involvement on an advisory level in the running of the business, meaning that you also get a good level of control over your investment. There are now many websites which offer the ability to become an angel investor, but you should bear in mind that it is your own money you are using, so it is essential to research and consider your investments thoroughly.
Alternative Investment Market
Regular trading brokers are primarily known for allowing investors to buy regular stocks and shares, CFDs and various other financial instruments and commodities, but there are also brokers which allow you to invest in the Alternative Investment Market (AIM).
This is a market which allows you to purchase stocks and shares in smaller businesses which are not listed on the London Stock Exchange. Since the companies are small, the market is fairly volatile, but that also means that you can get greater reward from successful investments. So, the AIM can be a great way to gain instant access to shares in businesses of varying sizes.
Crowdfunding
For those who have less capital to spare, but still want to support/invest in an SME, crowdfunding is almost certainly the best option. It involves investing in startup businesses of your choosing, usually with a large number of others investing a small amount in the venture.
Many startups have received all the funding they need through this method, and it is now considered to be one of the most effective sources of funding for startups of all varieties.
These form some of the most effective methods for investing in SMEs. If considering investing in small ventures, always measure up the risks and make sure they have a fool proof business plan to maximise your (and their) chances of success.
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