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Successfully Attracting Angel Investors

Successfully attracting angel investors, venture capital or equity partners requires well defined strategies that prove necessity of funding and a likelihood of profitability. Finding startup funding or major project funding can be challenging, and no one should tell you otherwise. The success of your search will be highly dependent on your ability to state your case and then back it up with in-depth analysis of the business or project based on realistic data and information.

A common mistake entrepreneurs make is using faulty data in the business plan. Angel investors are savvy and have been around the block (so to speak). In other words, investors willing to give a stranger business funding for a proposal have almost certainly developed business acumen and can spot unrealistic projections in a marketing plan or financial plan. Your business plan will be closely scrutinized and each number must be backed up with economic, marketing and financial information collected through research.  It’s unfortunate that many promising proposals submitted to angel investors are turned down simply because the projections make claims that are obviously unobtainable.

Would You Ask a Banker?

One test you can give your business plan is to ask if you would be willing to submit the proposal to a banker considering business loans. The analysis that requests for bank business loans get is always in-depth and thorough. There will be dozens of forms to complete, background and credit checks ordered, and economic data compared to the data in the business plan. Business funding or startup funding is only approved when you are able to provide:

  • Appropriate analysis of the market as well as finances related to the business
  • Detailed support for claims of potential profitability
  • Investment alternatives including angel investors or venture capital
  • Clear investor entry and exit strategy
  • Clearly written descriptions of business activities
  • Convincing arguments for investing in the enterprise

The convincing arguments for investing are critical to funding approval. The business descriptions and financial statements are essential to obtaining funding, but just as important are the arguments you make. The written and oral arguments are equally important too. You ability to communicate your business vision and need to angel investors and equity partners can make or break the deal. It is a critical component of the art of negotiation.

Making a Case for Private Money

The bottom line is that approaching angel investors is the same as approaching bankers and other types of lenders. The only difference is that the angel investors are considering giving you private money. Anytime you are asking someone to lend personal funds, the presentation of your idea must be well planned and efficient. It is the first real experience your business will have in the competitive business world.

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Attracting Equity Partners for Strategic Success

Two of the main reasons an entrepreneur or business may want to attract equity partners for business funding are: 1) to fund a particular project, or 2) to fund general business operations for the purpose of advancing the goals established in the strategic plan. It is critical that you precisely define your reason for needing additional investment dollars to insure that you target the investors most likely to fund your financial needs.

When you talk about funding a particular project, the word “project” takes on a broad meaning. A new project can include introducing a new product line to the marketplace or buying another company that sells products or services that will enhance your current company market position. A new project can also include expanding sales into foreign markets or expanding production.  Also qualifying as a new project would be the acquisition of equipment that will strengthen the company’s ability to meet customer demand.

On the other hand, equity partners may also agree to fund company operations based on a long-term strategic plan. Instead of a finite project, the investors may agree to provide startup funding for a new business that is equivalent to venture capital. Unlike most venture capital and business loans though, the equity partners will take part ownership of the company and participate in the management of the business.

Minority or Majority Ownership

What makes equity partners different from other types of investors like angel investors or venture capital is that the institutional or private equity investors will require a share in the ownership of the business (thus the use of the term ‘equity’). When the equity partners invest in a project, they will remain business owners usually up to the point the project is completed and the expected returns have been earned.  In these types of funding arrangements, the equity partners are often willing to take a minority ownership share.

When the equity partners offer business funding for general strategic operations, the requirements often include taking a majority share in the company. This makes sense if you consider that the equity investors are putting cash into the company with the expectation operational expansion or revisions will lead to higher profits in the future. The longer term nature of this type of funding naturally means the equity partners will want to control operating activity.

In the final analysis, it is clear that there are equity partners willing to consider almost any type of business financial need including startup funding.  One of the steps a business should always take when preparing a request for funding is to consider the various investment alternatives including business loans or angel investors that can fund the type of activities whether they are project based or based on strategic operations. If searching for equity partners is the best option, the business plan will be written to make it as attractive as possible to that particular type of potential investors.

Learn more at http://www.funded.com. 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 to access a vast network of business people, entrepreneurs, partners and service providers to help you start, finance and run your business, check out http://www.funded.com.

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The Cornucopia of Business Loans

You don’t hear the word cornucopia used much anymore except around the holidays. Did you know that it can mean more than a curved horn filled with vegetables? It also means “an inexhaustible store” and “abundance”, and that’s why it applies to business loans.

You can find plenty of news stories that say that the business of making business loans is almost nonexistent, but that’s simply not true. It may be true if you go down to your local bank and ask for a loan, but what about the bank in the next state or five states over or on the other coast or even overseas?  What about the SBA with its menu of loan options designed to help businesses of all sizes? What about private angel investors?

A Changed Lending Environment

The recession did change the lending environment. The days of easy credit don’t exist anymore. All that means though is that you need to put more effort into finding business loans and not that loans don’t exist. In other words, ‘easy credit’ has turned into ‘look harder credit.’

You just need to understand the new places to look for startup funding. For example, the National Federation of Independent Business points out that small banks are still business friendly. But there are so many other sources of business loans if you know how to find them. For example, you could find private investors who are willing to provide startup funding if you have a well written business plan.

It always comes down to knowing where to look. A loan is debt that you repay over a specified period of time with interest. Private lenders like to provide venture capital to entrepreneurs, offer business funding for business expansion and or become equity partners in businesses for one very good reason – they get higher returns on their investment than they possibly could investing in government securities or putting their money in a savings account. Certainly the stock market and currency markets remain volatile and give and take profits day-to-day right now.

Who Is Holding the Money?

What that means is that angel investors and other private investors are looking for entrepreneurs with good ideas and solid business plans and also offer a likelihood of higher returns. But even if you aren’t interested in venture capital, the SBA is offering a menu of loan programs including what they call the SBA 7(a) Loan Queue. This is actually a program in which the government backs loans made by banks to small businesses.

In fact, there is a SBA microloan program that offers short-term business loans for up to $50,000 to small businesses.  The SBA loans are made through banks, so once again you must find a bank willing to approve your loan. You don’t have to limit your applications to just local banks though which means you should get help finding all banks without regard to location that are willing to give you business funding so you have a real chance to succeed.

If you are looking for small business financing for purchase of inventory or furniture, working capital, equipment purchases, startup funding or business expansion, then you have to know where the cornucopia is or who is holding the money. There are private investors and banks willing to make loans and equity partners ready to share in your success.

More detailed information and useful business loans advice can be found at http://www.funded.com.

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Small Business Funding Is a Searing Hot Topic

Small business funding can’t be called just a hot topic because it’s far beyond hot…it’s searing hot. The National Federation of Independent Business (NFIB) reports that SBA 7(a) loans have fallen dramatically in the last few years. In 2010 only 41% of all businesses were able to get financing from any source, and 16% of businesses didn’t get any credit at all.

You can’t help but wonder how businesses are staying in business when they can’t get credit. But who says they can’t get credit?  The fact is that many of those small businesses did get credit from sources like angel investors and equity partners and other sources of private lenders.  In other good news, there are probably just as many or more businesses that are eligible for private funding, but they are still pursuing traditional financing routes.

Perfect Conditions for Successful Funding

There is much inefficiency in the lending marketplace which is precisely why there is a thriving private funding marketplace. This marketplace was created because of the mismatch between the number of lenders and amount of capital available and the number of borrowers looking for business funding.  It works the other way too. There are borrowers trying to find investors with little success. In a free enterprise economy these are the perfect conditions for creating a thriving market that fills a void.

Small businesses generated 64% of the new jobs in the economy in the last 15 years according to the NFIB. You would think that traditional funders would make sure that small business has the capital needed for job creation, but instead it is estimated that trillions of dollars are sitting idle in banks and corporate accounts.

This is a perfect storm for private lending. If the big companies and banks won’t spend or lend, then it is up to the private business funding market.  The private capital market is lending more than ever before for various purposes. There are lenders willing to loan small businesses venture capital and startup funding for example. The private market is also lending in a variety of forms that include business loans, equity partners and angel investors.

Making Sense of Funding

If there is so much money available for business funding then why aren’t more small enterprises taking advantage of this capital availability? There are several reasons.

·    Don’t know how to find investors
·    Don’t know how to complete a lender worthy business plan
·    Don’t understand the variety of capital available in the private market
·    Entrepreneurs get discouraged after getting turned down in the traditional lending marketplace
·    Don’t want to pay expensive originating fees for business loans

It can be disconcerting to consider approaching equity partners or searching for venture capital without help. It can be just as intimidating to consider presenting a new idea that needs startup funding.  It can certainly be frustrating going from bank to bank feeling like a beggar.

Using a central point for finding private business funding makes sense. It is efficient because you don’t have to go from lender to lender, and it is cost effective. Most of all, it offers funding solutions for the very businesses and entrepreneurs that keep the economy growing.

Want more info? Check out http://www.funded.com.

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Plenty of Options for Those Who Persevere

Many entrepreneurs exhaust all of their own money before they even start looking for outside investors for start up business funding. If you were lucky enough to convince some of your family and friends to invest in your new business, there is still a good chance it was not enough money. That means you have to find other sources of funding in order to take the business to the next level which may include buying inventory, purchasing equipment, or making the next 6 months of payroll. The thought of your business never getting off the ground or coming to a screeching halt is distressing to say the least.

Fortunately, you have plenty of options when it comes to funding sources. Given the complexity of convincing financial institutions or private investors to invest in a tight credit market and limping economy, it is always best to get professional assistance. Gaining access to a network of funders is critical, and like any “private” club you need an introduction.

What are these sources of funding?

  • Angel investors and angel organizations – Earthly angel investors are really private investors willing to invest their own funds in fledgling businesses. The often invest in the form of equity or convertible debt. They truly seem like angels when you need funding, but these angels are investing because they believe they can get a higher rate of return by investing in your company as opposed to investing in traditional financial tools. Many angel investors are also interested in promoting businesses in which they have personal experience or a special interest.
  • Business Loans – These are loans from financial institutions like banks. Despite what you read, the banks are lending to businesses. But since credit is still tight due to the recession, you improve your chances of success by accessing those banks with a record of lending through the recession. That is where a professional can be of invaluable assistance in locating funds domestically or globally.
  • Venture Capital – Venture capital is money that is loaned by a venture capital firm or individual. Larger amounts usually come from firms. These firms are often looking for start-up businesses that have high potential for fast growth and early returns. They take an equity position in your business meaning the venture capitalists take part ownership. But there are innumerable ways to structure the financing and equity arrangements so don’t rule out this type of  funding as a possibility.
  • Equity Partners – This is start up business funding in which private individuals invest in your firm in exchange for part ownership.  Ownership can take the form of stock ownership, but in some cases the investor may want to be involved in a way similar to a partner.
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Start Up Business Funding – Don’t Take No for an Answer

Your cousin Lou has told you that he wishes he could help out but start up business funding is out of the question. There’s the mortgage to pay and gas prices are rising and the kids need braces and on and on the excuses go. You received the same answer from Aunt Sally, your best friend Dave and even your own father. You have a great idea for a new business but can’t seem to convince anyone to help you get it off the ground.

Many entrepreneurs are rich in great ideas and have plenty of enthusiasm and a willingness to do what it takes to succeed. But desire and excitement are not dollars, and that is what is needed to get any business off the ground. Finding startup funding can be one of the most difficult challenges faced.  You haven’t proven yourself to potential investors, but you can’t prove yourself unless they give you business funding. It’s the proverbial catch-22. It reminds you of the time you were looking for your first job and the employers told you that you had to have experience first!