The biggest hurdle that an entrepreneur faces to start a business is the lack of credit funding. This is the most clichéd line faced by an entrepreneur, but it’s a 100% true fact. Some entrepreneurs may choose for credit card funding, some may go for venture capital. Hence angel investors are the most overlooked types of business credit funding.
Introduction
Angel investors are mainly persons or sometimes companies who invest their money into new businesses. This is a great type of business funding resource as it is a symbiotic relationship between the angel investors as well as entrepreneurs.
How it works
What happens actually is that the angel investors invest money in a new business. In this way the entrepreneur gets funds for starting the business whereas the investor gets higher rates of return which will not be possible in case they invest otherwise.
Advantages for the investor
When the angel investor invests he can access benefits in following ways:-
The investor may gain equity in the company. This helps the investor to have a say in the company affairs. This equity may be around 15 – 30% which is agreed mutually.
The angel investor can agree to provide funds through stocks.
Angel investors can get the equity from the beginning which allows the angel investors to bring in someone who can manage the business.
Requirements and potential
The basic and the most important requirement for acquiring any type of fund is a good and a clear business proposal. The basic criterion is that the entrepreneur should be very clear with his ideas and objectives. This should impress the angel investors as they can invest around $25000 to $3, 00,000 which is a good amount for the business to get started.
To summarize one should note that angel investors are a good idea if they provide good management as well as a good funding, but due to equity factors they can be a sinner as well.
