Published By Credit Suite at December 20th, 2015
Angel investors can be your saving grace when you are looking for business funding. Sometimes angel investors are willing to lend money when other banks and financial institutions simply won’t.
Interest rates and fees with angel investors can also be very favorable, sometimes better than bank rates and terms.
Even though angel investors are a great source of business funding, there are some things you want to be cautious about before you commit with an investor.
Despite their name, angel investors are not there to rescue the business. These investors are usually businesses or individuals who have money to lend but expect to take a safe risk and earn a nice return on their investment.
These investors are usually one-time investors. Many angel investors do not lend to the same person twice, even if that person paid them back perfectly.
They choose to spread their risk out over many people and many businesses to insure they get a safe return on their investment.
Another concern with angel investors is that they typically want a percentage or part of the company to lend the money. Sometimes they want a small stake, and other times they want full control and 51% ownership. But in most cases they do want a percentage of the company itself.
When the investor does want a stake in the company it is important that the terms are acceptable for the business owner also. The investors’ funds can really help grow a business, but the trade-off of handing over part of the company means the deal has to be worth it for the business owner as well as the angel investor.
Another concern with angel investors is they do sometimes commit, but don’t follow through and close on the transaction. For this reason it is essential that the business owner does not spend any of the funds until the deal is completely done and the funds are in the bank.
Nothing is worse than committing those funds only to discover that the deal falls apart and the angel investor never delivers the funds.
Angel investors are a great source of money for your business. But make sure you watch out and make the best decisions for you and your business if moving forward with this type of investor.