Last week, we posted about business loans, this week we are going to continue and talk about Investors.
Investors, sometimes call angel investors, business angels or angel funders, are affluent people or groups which provide an influx of capital in your business because they believe in it (or believe in its ability to make money). If you watch TV, the show Shark Tank is about business owners trying to get an angel investor to help take their business to the next level.
First, you need to have a business plan, so get one ready.
But do you think you want/need an angel investor? Let’s look at the pros of going down that road…
- No loan to pay back
- Unlike a loan, chances are the angel investor will not need to be paid back, even if there is a problem with the business. They are willing to take a risk on your business and they know that is what they are getting involved with.
- Often, an angel investor is a neighbor or family member or is connected to someone you know. So you likely have easy access to potential investors during the various stages of your business.
- Some investors, like the ones you see on Shark Tank, have years of experience working with businesses. This experience is something they can bring to the business, so they provide something other than just money.
But what about the cons? There are a few…
- Paying out
- Your investors did not provide the funds for no reason, they may believe in your product, but they also want a return on their investment. Be ready for them to ask for a minimum of 25% of the business, and a chunk of the profits.
- While some investors (silent partners) are fine to let you run the business how you want, many will insist on being part of the business decisions. After all, they are a part owner. While they are taking on risk in loaning you the money, they are not going to sit back and let you make decisions they disagree with. In some cases this lack of control, along with if you agree to let them have more than 50% equity, may push you out of your own business.
So are investors the way you want to go? Here’s a good place to start.
Good Luck and Good Sales!