By analyzing the performance of companies of a similar size in the same industry, entrepreneurs can try to forecast their potential when it comes to starting or expanding a new business. Usually there is a triggering event such as not having better career prospects which leads to starting a new business and you most likely need an angel investor. Once they have approved your business proposal, an angel investment group will begin their due diligence in regards to your ability to operate a business on a day-to-day basis. Entrepreneurs must give up part ownership of the business in exchange for a capital investment. Business loans can come from private investors if your business is already up and running. Angel investors generally want to work with companies that are within an hour of their home, as they will want to visit their investment from time to time.
If you own a large company, private investors are often the best financial income. You should be aware of the complications associated with small business financing. Very few companies have the potential to revolutionize an industry. Most investors are looking for a 20-30% return on investment on an annual basis when it comes to their capital investment in their small business. If you are working with any other type of outside funding source, you should have your business properly incorporated in the state in which you are doing business to simplify the process of raising capital from a legal perspective.
If you are already in business, you should look into obtaining a conventional loan or an SBA loan before seeking a private source of financing, as this capital is much less expensive than selling equity or preferred stock to a third party. Most angel investors contribute to companies located in close proximity.
After completing the first draft of your business plan, it will be necessary to review your executive summary. Your executive summary for an angel investor or any other type of funding source should serve as a roadmap for the rest of your business plan. You absolutely need to have a well written business plan when it comes to raising capital from a third party, be it a bank or an individual investor.
As a side note, you should never give up hope of finding outside capital for your business. There are about 250,000 angel investors who contribute $20 to $30 billion each year to more than 30,000 companies in the United States and Canada.
