AS THE ECONOMY continues to spiral out of control, small-business owners in need of a cash infusion are scrambling to gain investors' attentions.

Meghan Hoover, the founder of Chicago-based online international student travel network, XploreU, knows the frustrations of raising funds all too well. Since XploreU's launch in 2007, Hoover has successfully raised $100,000 in debt and equity. But to take her business to the next level, she's going to need another $650,000 — a sum she realizes is lofty, especially in today's economy. To improve her chances, Hoover has sought partnerships and advertising deals with other travel companies. She hopes the deals will not only generate revenue, but boost the company's investment potential as well. “If a small company like mine can prove that we are creative in a bad economy, that means that we will be creative and stay afloat in the future,” she says.

Hoover may be onto something. As investment dollars dry up, entrepreneurs seeking funding need to work hard to prove themselves by presenting a sound business model and evidence that they can make consistent profits, says Bob Froehlich, vice chairman of the investment committee at DWS Investments, Deutsche Bank's retail asset-management division in Chicago. Below are some other ways small-business owners can curry favor with investors in today’s tight funding climate:

Find the right investors

When searching for funding, focus on angel or private-company investors who'll likely be excited and interested in your company’s product or service. Contact investors with experience in your particular industry or who invest locally. “In times of uncertainty, investors tend to gravitate toward what they have a better understanding of,” says Froehlich. For state-specific angel investor groups check out private-equity firm Gaebler Ventures’ web site. The Angel Capital Association also lists angel groups by region.

Business owners can also contact a placement agent, suggests David Danovitch, an attorney at Gersten Savage, a New York law firm that advises start-ups and small companies. These agents connect wealthy individuals or institutional investors looking to invest with companies that are issuing securities. If an investor has a particular interest in a certain technology or consumer product, for example, the placement agent will likely know, says Danovitch.

Prepare your pitch

In most cases, you only get one chance to give a persuasive pitch. Be ready to answer questions and prove your product's potential, says Chris E. Talis, a senior partner at Hedgerow Mergers & Acquisitions in Teaneck, N.J. Not only do you need to be well-versed about your business's operations, costs and profit goals, but you also need to demonstrate demand for your product or service and provide projections for future sales growth and investment returns.

While perfecting your pitch, make sure your business plan is up to date and a professional and experienced management team is in place.

Offer peace of mind

Without a doubt, placing a bet on a start-up is risky business for investors. And one of the best ways entrepreneurs can improve their odds is to reduce that sense of risk. Being able to demonstrate real demand for a product will help investors feel less anxious — and perhaps, more generous. “If you have a successful track record in entrepreneurship or industry experience, that might help you as well,” adds Talis.

A couple years ago, Peter Mehta, chief executive of SANpulse Technologies, a Jersey City, N.J., software company, raised $2 million from private investors. Mehta attributes his success to the fact that he came to the investors with a finished version of his storage optimization software and purchase orders from customers he had already lined up. Having already run a successful software company didn't hurt either. "You have to have experience in growing businesses," he says. "There are a lot of hiccups along the way, and investors want to see that you've been down this road before.”

Communicate goals and offer transparency

Very few people like surprises, especially investors. Send them quarterly or biannual progress reports similar to those public companies issue to shareholders. Additionally, provide information about expected returns and projected timelines that are set to meet goals, says Talis. If the hope is to sell the company in five years, investors should be comfortable with having their money locked up for that long.

“You have to [also] explain how you expect ownership to be,” says Talis. If some investors choose to purchase preferred stock, for example, they need to understand that they are not going to have voting rights. Venture capital investors, however, generally have a heavier hand in a business's daily operations. In this case, the entrepreneur needs to be comfortable sharing some of the leadership decisions, says Talis.

Other recent Starting Up columns:

• Starting Up: Improve Your Chances of Landing a Loan
• Starting Up: Laid Off? One Option: Become Your Own Boss