One of the challenges of any business is raising money. Once you have raised enough money to get started, the big question is what to do with it. How do you wisely invest in a way that provides you with liquid assets as well as fixed assets that also offer a high return on investment? The answers can be tricky.
Being financially sound is more than just making enough profit to stay afloat. Calculating business loan rates and determining how best to keep the lowest debt ratio possible, while still building your credit is important. Having passive income from wise investments is key to your company’s future success.
Here are seven high ROI investments your company can make:
Investing in dividend-paying stocks is better in many cases than investing in growth stocks, as you may even have income from your stocks if the underlying stock price fluctuates. This can be an excellent way for your company to invest with a higher risk than CDs and savings accounts, but also with a higher return.
Of course, do this wisely as a part of an overall investment strategy. A portfolio of just dividend-paying stocks lacks a certain amount of security, but also a certain amount of growth potential associated with other stocks.
2. Peer to Peer Lending
When you were first a startup, you needed money, and you may even have borrowed it from another company who was invested in, or at least potentially interested in the benefits of your idea and how it could benefit them. The company may have made you a loan, probably at lower than the going interest rates, because they saw potential benefits for them in what your company was doing.
You can do the same. In peer to peer lending, you loan another company money as if you were the bank, set up a contract and payments, and they often benefit from the business they are developing as it complements or enhances yours. Peer to peer lending is not only a great way to form partnerships and get a high return on your investment, but it can also benefit your company in many other long-term ways.
3. Municipal Bonds
While not as high as the returns you will see on some other investments, and municipal bonds are consistent and well-paying performers. It is easier and wiser to take a gamble on a state, country, or other municipality that have another business.
What are the primary advantage of these investments? The interest that you earn on these investments is free from income tax. These bonds usually pay at least a quarter of a percent greater interest than you will recieve on a 30-year U.S. Treasury Bond. A higher yield, shorter time to maturity, and tax-free status make these investments rather appealing.
Annuities are contractual investments between you and an insurance company. The upside is that these contracts often have clauses that limit your downside losses even if stocks decline for some reason. These can be fixed or variable: the fixed rate annuities carry less risk, and the variable rate are more risk but also more potential for return.
The con of annuities is that they can be complicated, and often fees and commissions can eat up a large part of your ROI if you don’t understand them, so be sure to read and understand contracts thoroughly.
Also, when you were a startup, you needed investors. Sometimes it is hard to find people willing to invest a large amount of money for a stake in your company, but sometimes even smaller amounts of money add up. If you can get groups together, they can collaborate to buy a portion of an interest in your startup.
This is what micro-investing is. Instead of buying a significant stake in a startup, your company can buy a small stake, even a fraction of a percentage for a reasonable amount of money. Your return on this can be enormous. Of course, you can also lose your entire investment, so be careful in what you invest.
If the startup does something related to your business that can help support what you are doing, this can be the start of a great partnership. And you can buy a bigger stake as time goes along, making it easy for the two of you to work together, as you have a vested interest in their success.
6. Secondary Markets
Want to buy stock in a company before they go public? Yes, you can do that through private firms and what is called the secondary market. The company founder or another investor usually sell these shares. Online platforms such as SharesPost or EquityZen offer such investments.
The downside is that you have to be pretty well off to invest in these sites, and the minimum investment can be quite high, as a minimum of $100,000 on most SharesPost offerings. These shares often lack the transparency of publicly traded shares as well but have included some huge winners.
The risk is high, but the reward can be even higher in secondary markets.
7. Invest in Yourself
One of the highest ROI’s you can get in investing is investing in yourself. Put money into your business where things are growing and where you need growth and pay yourself the rewards when you are successful. Offer yourself and others on your team a bonuses when you reach specific goals.
You can make a lot of investments that will yield a high return. From dividend-paying stocks to risky secondary markets, there are all kinds of ways your business can win. Take a gamble and bet on your future. Your company will profit and thrive with your excellent investment leadership.