If you’re a startup or a small business owner seeking for business funding, it’s not surprising if you are having problems looking for a lending firm. With the economic recession experienced in a lot of countries recently, banks and other investment institutions have imposed higher standards for those who want to borrow money or secure investments.
In reality, it’s almost impossible for small businesses and startups to secure deals in well-established institutions. First of all, they don’t have the track record and experience that these institutions look for in their potential clients or partners. For them, investing in these businesses at these troubled times is a very risky move.
So what can small entrepreneurs do to get the financial support for their businesses? Easy, look for an angel investor. Angel investors are people who utilize their personal money to provide funding to businesses that show lots of potential. In lieu of the money that they will invest in these businesses, the investors – called angels – will get convertible debt or will own a part of the company.
Getting an investment from angel investors is not different from getting support from large investment firms. The difference, actually, is that a lot small businesses and startups can secure agreements with angels, whereas they would have a hard time talking to an investment firm.
So who are these angels?
Actually, they can be anyone. Angel investors can be a former entrepreneur, a successful medical practitioner, an accomplished educator, or even a young IT professional who became successful in his chosen field. What is important is that these people are interested in investing their money to a startup or a small business.
According to various studies, angels usually earn $100,000 a year and have a net worth of more than a million dollars. They are interested in investing about $150,000 in a business of their choice, with the agreement usually lasting from about seven to ten years. After that, many would either find a way out of the business or sign a better deal with the owner.
Most of the time, angels provide business funding in an industry that they familiar with. For example, an angel investor who came from the medical field would most probably want to finance medicine-related startups and small business. This is the same on the part of the educator and the young IT professional. They do this because most of these investors want to take an active role in running the business.
Before sealing a deal with an angel, entrepreneurs are tasked to consider this scenario. Would it be alright for them to work with an investor who wants to have some control in the business? If they are amenable to that, then there’s not problem with forging an agreement.
Aside from possible control of a business, angels invest in businesses because they think that they could gain a lot from the deal. They want profit. So if you fail to give them a presentation that would assure them that they will gain a lot from investing in your business, then don’t expect their support.
The good thing about angels is that they are very much present in every community. Entrepreneurs just have to open their eyes and use their networks to look for people who might be interested in becoming an angel investor.
Created by Mark Favre, it offers expertise and assistance with developing and funding your concept, including a private forum for queries and discussions. If you need access to investors and funding providers, please do check our website Funded.com