Need quick finance? Try Payday loans Less paperwork, fast moneyOne problem many small businesses face is raising sufficient capital to grow. A business in its primary development phase may face a challenge getting a bank loan. There are alternatives.
Angel investors are an excellent source of early-stage financing. They have a high net worth and invest their own money into emerging companies. They are often willing to tread where there is too much risk for banks and not enough profit potential for venture capitalists.
Angel investors will invest for a longer time-horizon than other investors -- up to five years or more -- and have a preference for industries and markets they know.
They may also invest smaller amounts of $1 million or less.
An angel investor should be a good partner by contributing expertise, industry contacts, and often leads on later rounds of financing. They understand the dynamics of a management team and their role within the team.
The problem with angel investors is how to find them. Angel investors are active throughout all business communities. They often come together in formal groups to evaluate investment opportunities.
Network to find them in chambers of commerce, local business groups, social groups, industry groups, vendor groups, consumer groups, and online networks. Most Michigan angel groups are currently interested in technology companies, but they will consider nontechnology companies if the proposition is strong.
Venture capital is attractive for new companies with limited operating history that are too small to raise capital in the public markets and too immature to secure a bank loan. A VC fund refers to a pooled investment vehicle that primarily invests the financial capital of third-party investors in enterprises that are too risky for standard bank loans.
Venture capitalists have stringent investment criteria and generally specialize in targeted high-growth industries. A VC fund's charter governs how the money must be invested. It may dictate the technology area of the investments, the stage of the companies or whether the firm will be a lead investor.
In exchange for the high risk venture capitalists assume by investing in smaller and less-mature companies, they usually get significant control over company decisions, in addition to a acquiring a majority ownership.
When attempting to raise equity capital, first develop an equity marketing strategy: set clear objectives for how the funding will be used to grow the business, do research and network to identify potential investors, and finally, understand and assess if they can satisfy the needs and demands of the targeted equity investor customer.
Only by doing this can an entrepreneur hope to be successful in raising capital.
Source:http://www.mlive.com/businessreview/wester