New businesses require money - equity investment. Virtually all start with personal equity from the owner.
Owners like you want to invest in their businesses because they believe in the opportunity and they expect to reap the financial rewards. From the funder’s perspective, both lenders and equity investors want to know that the owner is financially committed and has money at risk (skin in the game). This is an indicator that the owner is dedicated to making the project work and won’t bail out during difficult periods.
However, owners do not usually have all the required equity available, and it makes good business sense to spread the risk. As a result, virtually all new hotel businesses incorporate equity from investors. According to the Global Entrepreneurship Monitor 2019/20, 6 percent of US adults have informal investments in other people’s independent businesses with a median investment of $5,000. That’s not a large percentage, but it means that a very large number of households are small business equity investors.
So, how do owners of new hotel businesses raise equity from investors?