If you’re already in business, consider applying for a business loan instead. There are a tremendous amount of positives to working with angel investors, although you may be better suited for a business loan if your business is already up and running. How much equity you sell will depend on the quality of your business, and if you’re already up and running it’s imperative to consider whether or not you need an equity partner. In your business plan, you should always provide a complete analysis of the economy as it is, as both an angel investor and a financial institution will want to see this information.
Financial requirements vary from person to person as they relate to working with a private investor. There are a number of considerations that must be made before seeking capital for your business and you should have an appropriate attorney to advise you effectively on the matter. SBA loans are fantastic alternatives for angel investors to use. Your local bank may be able to provide you with some equity in addition to a loan if your business requires it on an ongoing basis.
As an alternative to finding equity investors, consider specialized lending programs offered by private investors who are more interested in a recurring revenue stream than an equity interest. In your business plan, you should always include a funding source that includes a full understanding of how you intend to use those funds, as they want to understand how their investment will be used.
Adverse economic changes should be discussed in your business prospectus when deciding whether or not you need business credit or angel financing. Capital always comes with a cost, and you should be prepared to pay significant expenses for the funding you seek.
As already mentioned, loans from private investors are very expensive. So if you are seeking private financing, you should ensure that your income statement and cash flow analysis demonstrate the fact that you are able to continuously repay a loan or royalty-based investment.
Finally, and it cannot be said often enough, you should always have a significant number of professionals who can assist you in developing a plan that will provide you with the capital you need to grow your business without having to take on an extremely expensive capital charge.