Navigating the waters of a start up business plan can be difficult. One of the most important things to get in order right from the beginning is how to secure your financing. Do you have your own funds? Should you get a business loan or how about an Angel Investor. What is the best way for you?
The term Angel Investor has always bothered me because they are not always Angels. In case you are not familiar with the term I will break it down for you. Quite simply it is a person or entity that lends money to a business for some type of return. I find it hard to believe that a real angel would do something fully expecting something in return but this is the term in business lingo. There may be Angel Investors out there giving away free money but I seriously doubt it.
Let us go ahead and assume that anyone you come across who is an Angel Investor is looking to make their money work for them to some degree. Some will have reason to believe that your venture is a valuable service and just want their money to go to a good cause and earn a little profit, and there are others who see you as an opportunity to strike it. The latter may prove to cancel out all the reasons you wanted to start your own business in the first place so make sure you understand your investor’s motives.
Now Angel Investors come in many styles and it is important that you find someone who is compatible with not only your personality, but your business goals. Investors motives can run the full gamut of reasoning. For instance, a do gooder Angel who just likes to invest in people they like either due to personality or business idea. They just enjoy it and this is a pretty good investor to have. Tech Angels those who likes to invest in a new technology and probably like the glory as much as the potential return. Hopefully they will not be hanging around the lab causing trouble. A lender angel is someone who takes a gamble but also goes out to sell other investors on the program. A silent angel is someone who lends and stays out of your way. This is the best if you can find one. The dark angel is one who has their own agenda and may not even be concerned with the well being of your business. Try and sniff out these guys early on and get rid of them.
Let’s face it starting a business can be scary. But, it also can be very exciting. Everyone has a different reason for wanting to strike out on their own Each of us wants success, and we can set that stage by properly securing our financing. Do rush into anything or just accept money from anyone who is willing to give it. The price may be to high and the consequences a disaster. You want to make sure you have the level of control in your own business that makes you comfortable. You must explore all ways to capitalize because some are clearly better than others.
It is very possible to get an unsecured business loan in today’s economic climate so at least look into them. Not only can you get a loan with your personal credit, you will help establish your business credit history which in turn will open up financial doors in the future. For me, it is the best alternative to giving up control of your business to investors.
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