Angel investors are wealthy private investors focused on financing small companies in exchange for taking an equity stake in the firm. Unlike venture capitalists, angels may be more patient with entrepreneurs and open to providing smaller dollar amounts for longer time periods. But they do want to see an exit strategy at some point down the line where they can pocket their profits, either through a public offering or by having your business acquired by another company.
 
The advantage for your business is you don’t have to repay the funds because you are giving ownership shares in return for the money. Angel investing is usually reserved for established businesses beyond the start-up phase that show promise for profits but which still need capital to develop products or just push the business to the next level. Since the angel’s money is on the line, they can be highly motivated to help you succeed through mentoring or by offering direct management help.
 
The disadvantage of accepting angel funding is you might have to give away 10% to 50% of your company. You could lose control of your business if the angel investors determine that you are the one keeping the company from succeeding.
 

Game Plan

  • The U.S. Small Business Administration’s microloan program offers loans up to $50,000 to help small businesses expand. The average microloan is about $13,000. For more information, including eligibility requirements, terms, and interest rates, visit sba.gov.
  • For help in finding microlenders in your area, start by contacting your local SBA district office.
  • The Association for Enterprise Opportunity (AEO) calls itself “The Voice of Microbusiness.” You can search for microenterprise development organizations, and find a mentor for one-on-one guidance on their website.
  • Learn if a microloan is right for you.
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